Goldman Sachs

Digging Your Own Hole

A view of the Goldman Sachs stall on the floor of the New York Stock Exchange July 16, 2013. REUTERS/Brendan McDermid/File Photo GLOBAL BUSINESS WEEK AHEAD PACKAGE SEARCH BUSINESS WEEK AHEAD 17 OCT FOR ALL IMAGES
A few days ago, Goldman’s president Gary Cohn announced that America’s banks have never been in such good shape.
  • Why it matters

    Why it matters

    The embattled Deutsche Bank is considering a partial withdrawal from the U.S. investment banking market, which would mean giving up market shares on its already-booming U.S. competitors’ home turf.

  • Facts

    Facts

    A partial withdrawal from the U.S. investment banking market could help Deutsche Bank, once among the world’s top five investment banks, reach a settlement with the U.S. Justice Department and lower a looming $14 billion fine.

    US investment bank Goldman Sachs has reported a 58% rise in profits for the third quarter of 2016. Its earnings jumped to $2.1 billion (£1.9 billion) in the three months to the end of September.

    Deutsche Bank analysts on average expect a 2016 net loss of €1.3 billion, or $1.4 billion, and a third-quarter loss of €605 million.

  • Audio

    Audio

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There’s no end to the fireworks. Last week Bank of America and JP Morgan published outstanding results, and on Monday it was the turn of Goldman Sachs. Faced with this spectacle, an observer could be forgiven for asking the simplistic question: How is this possible?

After all, the newspapers are full of reports about bank crises. Basic conditions are bad: Rock-bottom interest rates are eating up margins. Trading is down and markets are unpredictable. On some days, all the agitation about Deutsche Bank is reminiscent of the financial crisis.

But the news from America is quite different. Revenues are up, and stock prices are climbing.

Goldman Sachs serves as a vivid demonstration of why the Americans are currently at the top of the pile. More than any other institute, the bank relies on trading bonds, stocks and commodities – and trading has surged ahead by 17 percent.

On a half-yearly basis in 2016, U.S. banks occupied the first five places in an international ranking for the first time in five years.

To put it into perspective, in this segment Goldman Sachs generated revenues of $42 million every day in the last quarter. According to analysts’ estimates, Deutsche Bank only managed daily revenues of $26 million.

The latest figures from the renowned British consultancy Coalition tell the story: On a half-yearly basis in 2016, U.S. banks occupied the first five places in an international ranking for the first time in five years. Deutsche Bank slipped from third to sixth place, followed by Barclays, Credit Suisse and UBS.

The extent to which the Americans are stealing a march on the Europeans is shown by the investment banking revenues of JP Morgan in Europe. It is true that they only comprised a fraction of the financial giant’s total revenues in the first six months – after all, the United States is the New York bank’s core market. However, it was enough to topple Deutsche Bank from number one position in its home market.

It’s no wonder then that Deutsche Bank sees itself obliged to pull out of some markets and products. Chief Executive John Cryan hopes this step will pay off in the long term by achieving urgently needed improvements in efficiency.

However, for the time being it gives their U.S. competitors the opportunity to gain market share.

A few days ago, Goldman’s president Gary Cohn announced that America’s banks have never been in such good shape. Indeed, figures presented by the major Wall Street players in recent days are clear evidence that U.S. banks are leaving the European competition far behind.

 

To reach the author: jahn@handelsblatt.com

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