Bank Profits Increase
By Countercurrents.org
17 October, 2012
Countercurrents.org
Banks’ profit is not influenced by widespread poverty among the common persons. These firms profit while the ordinary citizens encounter hunger, unemployment, and many sorts of hardship. This makes it a “tricky” economy, an economy driven by profit motive only.
US bank Goldman Sachs’ net profits, according to a BBC report[1], rose sharply in the three months to the end of September. Profits for the third quarter were $1.5bn (£930m), higher than expected, compared with a loss of £393m for the same period a year ago.
The report added:
The bank makes most of its money from providing services to big institutional investors such as multi-national corporations and pension funds.
Net revenues more than doubled to $8.35bn from $3.6bn a year earlier.
The profit figure was boosted by higher income from underwriting new share and bond offerings to investors.
The total paid out in compensation and benefits including salaries and estimated year-end bonuses, was $3.68bn, more than double the amount for the same period last year.
Goldman's statement said this reflected the higher net revenues made in this year's third quarter.
Goldman Sachs' chairman and chief executive, Lloyd Blankfein, said the results were good in what was a difficult climate: "This quarter's performance was generally solid in the context of a still challenging economic environment."
RTE reported[2]:
Goldman Sachs said it would raise its dividend. Net income for the three month period was $1.5 billion, or $2.85 a share.
It’s a tentative sign that companies are more willing to take risks like going public or raising money.
The bank's investments in stock and bond securities came back from a loss a year ago and turned a profit, riding a wave of higher stock prices around the world. Trading in mortgages also propelled Goldman's results higher.
But the bank continued to trim jobs and expenses in the quarter. Goldman shed about 1,600 jobs, or 5% of its work force, compared with a year ago, and cut expenses like communications, occupancy and market development.
Trading in mortgage products increased the revenue the bank earned for helping clients execute trades, but other areas were weaker.
Revenue from helping investors execute stock trades fell because of "significantly lower" commissions, fees and market volume, the bank said. The bank also made slightly less revenue from advising clients on mergers and acquisitions, strategy, and similar matters.
Last year it reported a rare quarterly loss, suffering as its clients pulled out of the market, scared off by the uncertainty caused by contentious budget negotiations in the US Congress and a downgrade of the US government's debt rating.
Citing Bloomberg Washington Post reported[3]:
Goldman Sachs Group Inc., the fifth- biggest US bank by assets, benefited from a rise in asset values that boosted the firm’s holdings of stock and debt, reversing a loss from a year earlier. Revenue from trading fixed-income, currency and commodities fell short of gains posted by JPMorgan Chase & Co. and Citigroup Inc.
Goldman Sachs raised the quarterly dividend to 50 cents from 46 cents, the second increase this year.
The bank’s investment includes Industrial & Commercial Bank of China Ltd., equities, debt securities and loans.
Fixed-income, currency and commodity trading, or FICC, revenue climbed 28 percent from a year earlier to $2.22 billion and was up 1 percent from the second quarter.
Compensation, the firm’s biggest expense, more than doubled from a year earlier to $3.68 billion. Compensation in the first nine months of the year rose 10 percent to $11 billion, enough to pay each of the firm’s 32,600 employees an average of $336,442 for the period.
Source:
[1] BBC, “ Goldman Sachs reports higher-than-expected third-quarter profit”, Oct. 16, 2012, http://www.bbc.com/news/business-19963120
[2] RTE, “Goldman Sachs' earnings soar, but caution rules”, Oct. 16, 2012, http://www.rte.ie/news/2012/1016/goldman-sachs-earnings-soar-but-caution-rules-business.html
[3] Christine Harper, “Goldman Profit Beats Estimates on Investments, Underwriting”, Oct. 16, 2012, http://washpost.bloomberg.com/Story?docId=1376-MBZHN51A1I4H01-51TG5D11KAFRB8PQGIDEAL9CN4
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