Mergers frenzy sees Goldman Sachs profits smash expectations 

Boom in mergers and takeovers sees Goldman Sachs profits smash expectations

Goldman Sachs’s results smashed expectations as a boom in deal-making saw its profits rocket higher.

The US investment bank – known as the ‘Vampire Squid’ of the financial sector – yesterday reported a profit of £3.8billion in the three months to October, 66 per cent higher than the same period last year amid a surge in merger and acquisition (M&A) activity.

Acquisitions have been made much more attractive by ultra-low interest rates, which have made it easier to fuel purchases through borrowing.

Goldman Sachs – known as the ‘Vampire Squid’ of the financial sector – yesterday reported a profit of £3.8bn in the three months to October, 66pc higher than the same period last year

Goldman said it had retained its number one spot for completed M&A over the period, adding that its revenues from its financial advisory unit, which includes M&A fees, had rocketed 225 per cent to £1.2billion.

The boom helped the company’s investment banking division deliver its second-highest quarterly revenue figure of £2.7billion, 88 per cent higher than the same period in 2020.

Goldman’s overall revenues, meanwhile, surged by 26 per cent to £9.9billion. The business also saw a strong performance in its consumer banking unit, which includes its Marcus wealth management app, as revenues in the segment climbed 17 per cent to £278million.

The boost was attributed to higher credit card balances and account deposits.

Marcus, which also offers customers savings accounts, is part of a strategy by Goldman boss David Solomon to diversify the bank’s revenue and make it less reliant on investment banking.

‘The third quarter saw strong operating performance and an acceleration of our investment in the growth of Goldman Sachs,’ Solomon said.

He added: ‘Looking forward, the opportunity set continues to be attractive across all of our businesses and our focus remains on serving our clients and executing our strategy.’

The bank’s shares surged more than 3 per cent on Wall Street in the wake of the blockbuster results. 

Goldman’s numbers follow similarly strong earnings from other US financial titans, with rival JP Morgan also reporting third-quarter profits on Wednesday that beat the market’s expectations.

Similarly, Bank of America delivered quarterly revenues of £16.6billion on Thursday, topping market forecasts, while Citigroup saw its third-quarter income soar to £3.3billion from £2.3billion in the same period a year ago.

The strong results provided a boost to the US markets, with the Dow Jones Industrial Average up more than 1pc at close to 35,285 points last.

While strong results from the banks have soothed some investor nerves about the state of the global economy, there are worries that the looming spectres of inflation, supply chain bottlenecks and surging commodity prices could cause market volatility to resurface into the winter months.