Goldman Sachs profit hits 47% in Q3

Bloomberg

Goldman Sachs Group Inc., once the most profitable firm on Wall Street, reported a 47 percent increase in third-quarter earnings as revenue from bond trading surpassed analysts’ predictions.
Net income rose to $2.09 billion, or $4.88 a share, from $1.43 billion, or $2.90, a year earlier, the New York-based company said.
Chief Executive Officer Lloyd Blankfein, 62, has cut jobs, given responsibility to more junior employees and lowered compensation to reduce expenses and preserve flexibility to ramp up trading when activity returned. This quarter shows the benefit of the strategy, which attracted some skepticism among analysts as competitors such as Morgan Stanley decided to retreat instead.
“We saw solid performance across the franchise that helped counter typical seasonal weakness,” Blankfein said in the statement.
Fixed-income trading revenue rose to $1.96 billion, beating the $1.7 billion estimate of five analysts surveyed by Bloomberg. Equities-trading revenue of $1.78 billion surpassed the $1.69 billion estimate. The sales-and-trading division is overseen by Isabelle Ealet, Pablo Salame and Ashok Varadhan.
The bank is battling sluggish revenue prospects and trying to show investors it can generate a return on equity above its cost of capital after years of returns often in excess of 20 percent were the envy of the industry.
Goldman Sachs enacted at least four rounds of job reductions in New York this year that accounted for more than 400 dismissals. It also extended cuts in its fixed-income division to roughly 10 percent of staff, double what it normally culls each year, and eliminated dozens of managing directors, executive directors and vice presidents across the mergers and debt and equity capital-markets teams.
Asia Jobs
In recent weeks, Goldman Sachs has reduced its projection for job cuts in Asia. The firm now intends to trim about 15 percent of its investment-banking jobs in Asia outside Japan, fewer than the 25 percent, or 75 positions, initially considered last month, a person with knowledge of the matter said on Monday.
The company has also sought to develop new businesses to help generate revenue and boost returns. The bank this month began offering loans through its online-lending platform Marcus by Goldman Sachs, which offers unsecured consumer loans to creditworthy borrowers. It also has an online deposit-taking franchise that it purchased from General
Electric Co. this year. Consumers can open a savings account there with as little as $1.
Goldman Sachs’s stock slumped 6.2 percent this year through Monday, lagging behind the 0.2 percent drop for the S&P 500 Financials Index.
Goldman Sachs is the fifth of the six biggest US banks to report results. JPMorgan Chase & Co. kicked off the US financial industry’s earnings season, topping analysts’ profit estimates on a 48% surge in fixed-income trading.

Goldman Sachs Asia
chairman to step down
Goldman Sachs is losing an architect of its Asia-Pacific division at the same time it confronts slowing activity in the region and a probe over its dealings in Malaysia.
Mark Schwartz, 62, has decided to retire from his post as chairman of Goldman Sachs Asia Pacific, according to a memo Monday from chief executive Lloyd Blankfein and president Gary Cohn reviewed by AFP.
Beijing-based Schwartz, a 27-year Goldman veteran, will leave his post at the end of 2016. He will serve as a senior director at Goldman following his departure from China.

Schwartz played an “instrumental role” in building Goldman’s business in Asia, as chairman of Goldman Sachs Asia Pacific in Tokyo in the late 1990s and reprising the role again in 2012 from Beijing, said the memo.