Goldman Sachs reports 3Q loss, BofA makes US$6b profit

Goldman Sachs Group Inc reported a third-quarter loss of US$428 million Tuesday, only the second quarterly loss since the investment bank went public 12 years ago.

Revenue from underwriting stocks and bonds plunged as businesses, unnerved by political wrangling in Washington and volatile markets, held off on new stock and bond offerings. Goldman also lost nearly US$3 billion on investments in stocks, bonds and a stake in a Chinese bank.

Bank of America, meanwhile, earned US$6.2 billion in the third quarter on accounting gains and the sale of a stake in a Chinese bank, which offset lower revenue and income in its credit card, real estate and investment banking businesses.

Bank of America gained US$3.6 billion from selling its stake in China Construction Bank

Bank of America is also no longer the largest bank in the nation by assets, which fell to US$2.21 trillion in the quarter. The Charlotte, North Carolina, bank ceded the bragging rights to rival JPMorgan Chase & Company, which reported total assets of US$2.28 trillion.

Goldman investors were unfazed by the loss, which had been widely expected due to the turmoil in financial markets this summer. Goldman's stock was up two per cent to US$98.88 at noon.

UBS analyst Brennan Hawken said the stock, which had fallen from about US$128 since second-quarter earnings were reported three months ago, had already priced in the impact of the dismal third-quarter results.

"Well, we were braced for impact and we got it," Nomura analyst Glenn Schorr wrote in a note to clients. Schorr noted that Goldman was the bank most exposed to declines in global assets like stocks and bonds.

Goldman's chief financial officer, David Viniar, attributed the weak results to volatile markets and the weakness of European banks.

"Last week, big market rally; yesterday, big market decline," Viniar said on a conference call. "So I think there's still a lot of uncertainty and a lot based on who says what on what day."

Cutting expenses

The bank has been cutting expenses to shore up cash and said in July that it would eliminate as many as 1,000 jobs. Tuesday it said it had 34,200 employees, down 1,300 from the previous quarter. Some of those cuts came from the bank's sale of the Litton Loan Servicing Unit.

The latest loss was equivalent to 84 cents per share. The bank earned US$1.7 billion, or $2.98 per share, in the same period a year ago. Revenue slumped 60 per cent to US$3.6 billion, missing analysts' estimates.

Investment banking had been a bright spot in Goldman's pre-vious quarter, but a sharp slowdown in stock and bond offerings led to a 61 per cent plunge in underwriting revenue.

Revenue from bond and currency trading, a major moneymaker for Goldman, recovered slightly from a dismal performance in the second quarter but was still down 36 per cent from a year ago.

Goldman, which has been public for 12 years, has recorded only one other quarterly loss since then, at the end of 2008 at the height of the financial crisis.