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Goldman Sachs (GS) posted third-quarter earnings on Wednesday that blew away Wall Street’s estimates, as strong trading and consumer banking revenue overwhelmed the impact of the COVID-19 pandemic.

Here were the key figures versus expectations for the third quarter, according to analysts.

  • EPS: $9.68 versus $5.57 expected
  • Net Revenues: $10.78 billion versus $9.45 billion expected

The firm’s earnings per share is a record for a quarter, while revenues rose 30% from a year ago.

Goldman’s stock jumped 3.96% in pre-market action to trade near $216.90 per share, up from Tuesday’s closing price of $210.81.

Like other bulge-bracket banks, the Wall Street giant has steadily carved out money for expected loan losses due to the coronavirus outbreak but has devoted less money to that segment as economic conditions improve. Goldman set aside $278 million for credit losses in the quarter, down from $291 million a year ago and the $1.59 billion set aside in the second quarter.

“Our ability to serve clients who are navigating a very uncertain environment drove strong performance across the franchise, building off a strong first half of the year,” CEO David Solomon said in a statement.

“As our clients begin to emerge from the tough economy brought on by the pandemic, we are well positioned to help them recover and grow, particularly given market share gains we’ve achieved this year,” he added.

The firm noted that the decrease reflects “reserve reductions from pay downs on corporate lines of credit and consumer installment loans, partially offset by reserve increases from individual impairments related to wholesale loans and growth in credit card loans.” The firm’s total allowance for credit losses is $4.33 billion.

Elsewhere, Goldman set aside provisions for litigation and regulatory proceedings of $3.15 billion, which it said reduced its diluted EPS by $8.77.

For the quarter, trading revenues came in at $4.55 billion, up 29% from the same period a year ago. Goldman’s Fixed Income, Currency and Commodities (FICC) sales and trading revenue hit $2.5 billion, while equities trading generated $2.05 billion in revenues.

Collectively, those businesses accounted for 42% of Goldman’s quarterly revenues.

The firm’s core investment banking business delivered $1.97 billion, up 7% from the same period a year ago, driven by higher underwriting revenues.

The bank’s Consumer & Wealth Management business posted $1.49 billion in quarterly revenues, driven by record revenue in the consumer banking business.

Revenues for the consumer banking business rose 50% from a year ago to $236 million, reflecting higher credit card loan balances. What’s more, consumer deposits grew to $96 billion in the quarter, up from $92 billion in the prior quarter.

Revenues for asset management came in at $2.77 billion in the quarter, jumping 71% from the same period a year ago.

Author: Julia La Roche

Source: Finance. Yahoo: Goldman Sachs Q3 earnings shatter Wall Street estimates on strength in trading, consumer banking

Shares of electric truck start-up Nikola (NKLA) sank sharply on Monday, following the overnight resignation of executive chairman and founder Trevor R. Milton, who has been fending off accusations of fraud raised by a large investor betting against the company.

The stock, traded on the Nasdaq, tumbled by over 30% at Wall Street’s opening bell on Monday, but clawed back some of those losses in midday trading. Nikola is a competitor of industry leader Tesla (TSLA), which itself has been in the crosshairs of short-seller campaigns accusing CEO Elon Musk of mismanagement and impropriety.

Nikola has been under pressure for more than a week, after activist short-seller Hindenburg Research issued an extensive report on Sept. 10 claiming Nikola “is an intricate fraud built on dozens of lies” over the course of Milton’s career.

In that report, the short-seller raised 53 questions for the company. Hindenburg’s accusations have sent the company — once one of this year’s hottest stocks — reeling, and put Nikola under a regulatory microscope. For those reasons, Milton asked the company to allow him to step down, he wrote in a Twitter post early Monday.

“The focus should be on the Company and its world-changing mission, not me. I intend to defend myself against false allegations leveled against me by outside detractors,” he added.

For its part, Nikola has denied the accusations as “false and defamatory” — and blasted Hindenburg’s move as “financially motivated to manipulate the market and profit from a decline” in Nikola’s share price.

It’s unclear whether Hindenburg’s accusations are legitimate, but the market action appears to be playing right into the firm’s hands. Nikola is now trading at a fraction of its 52-week highs near $94 — the spike high hit in June after the company engineered a public offering via a successful reverse merger.

It bears mentioning that until very recently, Tesla was also a favorite target of bearish investors — who have been caught flatfooted by the stock’s skyrocketing price and reversal of fortunes — becoming the subject of Musk’s ridicule.

Last week, Bloomberg reported that the Securities and Exchanges Commission (SEC) is probing Hindenburg’s claims. Nikola said in its response that it contacted the SEC and “intends to fully cooperate” with its inquiry. The Justice Department is also making an inquiry, according to a Financial Times report.

Shortly after Nikola’s response, Hindenburg Research, which pointed out that the company answered 10 of its 53 questions, characterized the company’s rebuttal as “a tacit admission of securities fraud.

In response to Milton’s resignation on Monday, Hindenburg Research tweeted: “We think this is just the beginning.”

A ‘highly dependent’ relationship

BREAKING: FreightWaves reporting “Trevor Milton has resigned as Executive Chairman of Nikola Motors (NASDAQ: NKLA) and has departed the company effective immediately.”

In an 8-K filing with the Securities and Exchange Commission explaining its founder’s reasons for stepping aside, the company noted that Milton will remain an “unpaid consultant” and “will be making himself reasonably available to provide consulting services” through the end of 2020.

Milton still holds 91.64 million shares, or a 24.18% stake in the company, according to Bloomberg data. Yet the filing noted that he agreed to relinquish 100% of the 4.859 million performance-based stock units granted on Aug. 2, and any right to enter into a two-year consulting agreement with an annual fee of $10 million.

In the company’s 10-Q report issued last month, Nikola said it’s “highly dependent” on the services of Milton — and its arrangement with the founder going forward reflects that relationship.

As part of the agreement, the company committed to paying for “reasonable costs of a security inspection” of Milton’s residence and said it will reimburse him for up to $100,000 for a full-time security detail for three months.

In the August filing, Nikola stated that if Milton “were to discontinue his service to us due to death, disability or any other reason, we would be significantly disadvantaged.”

Milton also agreed to “fully cooperate” with the company in investigating, defending, or prosecuting any claim. Nikola will also pay or reimburse Milton for all out-of-pocket expenses incurred during this process, the document shows.

As for social media, Milton agreed to “promptly revise” his employment status on social media platforms, including LinkedIn so that he is “no longer identified as holding any position” with Nikola or serving on its board. Before posting about the company or its employees, Milton agreed to consult with his attorney and Nikola’s chief legal officer.

Stephen Girsky, a former vice chairman of General Motors and Nikola board member, has been appointed Nikola’s chairman, effective immediately.

Nikola did not immediately respond to Yahoo Finance’s request for comment.

Author: Julia La Roche

Source: Finance Yahoo: Tesla competitor Nikola’s stock craters after founder Trevor Milton resigns chairmanship

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