Monday, October 18, 2021

Goldman Sachs Rises After Upbeat Q3 Profits

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News shaping
the markets today

     

What’s happening: Shares of Goldman Sachs Group gained on Friday after the bank reported its third-quarter profits ahead of market expectations.

What happened: Goldman Sachs was among the last of the six major big banks to report earnings for the third quarter.

The company easily surpassed Street expectations for the sixth consecutive quarter on the back of strong investment banking revenues.

How were the results: Goldman Sachs reported strong growth in both revenues and profits for the third quarter.

  • Total revenues climbed 26% to $13.61 billion, handsomely surpassing the consensus estimate of $11.67 billion.
  • Profits climbed to $5.28 billion, from $3.23 billion in the same quarter a year earlier.
  • Earnings came in at $14.93 per share, up from $8.98 per share in the year-ago quarter, and beat market expectations of $10.14 per share.

Why it matters: Merger and acquisition volumes around the world surpassed all-time highs during the third quarter, with Goldman Sachs maintaining its top spot as a global M&A advisory. Driven by this, the company’s overall financial advisory revenues jumped by a whopping 225% to $1.65 billion.

Revenues of the company’s investment banking unit surged sharply by 88% year-over-year to $3.7 billion, recording its second-best quarter ever. The bank’s trading performance was also impressive, with equity trading revenues growing 51% to $3.1 billion.

Net revenue in the bank’s consumer banking unit also spiked 17% to $382 million, reflecting an increase in credit card balance.

However, the bank’s revenue from equity investments plummeted 34% year-over-year to $935 million in the quarter.

“The third quarter saw strong operating performance and an acceleration of our investment in the growth of Goldman Sachs," said CEO David Solomon. "We announced two strategic acquisitions in our Asset Management and Consumer businesses which will enhance our scale and ability to drive higher, more durable returns," he added.

How shares responded: Shares of Goldman Sachs rose 3.8% to close at $406.07 on Friday following the release of results. The stock has added more than 53% year to date.

What to watch: With Goldman Sachs looking to build alternative revenue streams and focus more on consumer banking, investors will carefully monitor the performance of the consumer business.

The Markets Today

     

The Canadian dollar will be in focus today ahead of several economic reports from the country.

Context: The CAD/USD forex pair closed slightly higher on Friday, recording gains for the fourth straight week.

Details: The Canadian dollar has climbed around 2.5% since the beginning of the month, following a 0.5% decline in September.

Canada is the world’s fourth-biggest exporter of crude oil, which closed higher on Friday with rising demand for fuel with the recovery of the global economy. US WTI crude prices surged 1.7% to settle at $82.66 per barrel on Friday, reaching a seven-year high level.

The US dollar index, which measures the greenback’s performance versus six major currencies, closed flat at 93.95 on Friday. “The dollar has given up some of its recent gains this week, but we are reluctant to see this as a signal that the bullish sentiment on the greenback is abating. It appears more likely that the modest correction was triggered by some profit-taking on long dollar positions as markets now fully price in the start of Fed tapering by year-end and the first hike in September/November 2022,” ING forex strategist Francesco Pesole, said in a note to clients.

On the economic data front, wholesale trade in Canada grew 0.3% month-on-month to C$70.3 billion in August, missing the consensus estimate of 0.5%. Despite the miss, the country recorded its first month of improving wholesale sales, after two consecutive months of contraction, which supported market sentiment for the loonie.

The CAD/USD forex pair edged higher to 1.2365 on Friday, after climbing to its highest intraday level since July 6 at 1.2337. The Canadian currency added around 0.9% last week, notching gains for fourth straight week.

What to watch: Traders await the release of economic reports on housing starts, foreign securities purchases and Bank of Canada’s business outlook survey. Housing starts in Canada, which fell 3.9% to 260,239 units in August, are expected to decline further to 255,000 in September.

The covid-19 pandemic remains one of the major concerns for markets due to the spread of the Delta variant, with total global infections surpassing 241.4 million.

Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.09%, 0.75% and 0.63%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Central Bank of Brazil’s focus market readout, America’s industrial production, capacity utilization, manufacturing production, NAHB housing market index, government budget, foreign bond investment, net long-term TIC flows and net treasury international capital flows, as well as China’s foreign direct investment.