Banks See Mixed Q3 Results

Terry Flanagan

Record trading volume in the third quarter did not directly equate to similar results on the bottom lines for some of the big broker-dealers.

Several of the bulge bracket banks have released their third quarter performance figures, with some unable to capitalize on the substantial volatility and order flow seen during the period.

“Our results were significantly impacted by the environment and we were disappointed to record a loss in the quarter,” said Lloyd Blankfein, Goldman Sachs chief executive officer. “Investor confidence as well as asset prices across markets were lower in the third quarter given the uncertain macroeconomic and market conditions.”

Goldman Sachs posted a net loss of $393 million in the quarter, down significantly from a year earlier profit of $1.9 billion. It marked only the second time in 12 years that the bank has experienced a quarterly loss. While it was able to cut down operating expenses by 29 percent during that time frame from $6.1 billion to $4.3 billion, it was not enough to offset a 60 percent decline in total revenue, from $8.9 billion to $3.6 billion.

The decline came despite record levels of trading volume seen during the third quarter. NYSE Euronext handled 2.6 billion shares per day on average, up 8.8% from last year, and up from the 2.3 billion seen year-to-date. The IntercontinentalExchange’s futures ADV increased 23 percent in the third quarter of 2011 over the prior year, and grew 17 percent for the month of September 2011 compared to September 2010.

JPMorgan Chase was the first of the big banks to release its third quarter financial performance, which was also down from 2010. Many industry observers are expecting more of the same from most other financial institutions as the earnings season progresses. JPMorgan as a whole for the quarter had net income of $4.26 billion on revenue of $24.37 billion. Not only was this down from the second quarter, but it was also a drop off from the $4.4 billion seen in Q32010.

“All things considered, we believe the firm’s returns were reasonable given the current environment,” said Jamie Dimon, chairman and chief executive officer of JPMorgan in a statement.

Citigroup had a successful three months, with net income coming in 74 percent higher year over year, to $3.8 billion. Bank of America also saw a big bump in earnings to $6.2 billion from a $7.3 billion loss last year. However, not counting certain one-time charges, the profit would be closer to $2.7 billion during the quarter.

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