A trio of earnings released Wednesday from three of America's biggest banks - Goldman Sachs, Bank of America and Wells Fargo - laid to bare the contrast between those banks able to benefit from a surge in Wall Street activity and others unable to escape the impact of the deepest economic downturn in decades.
Goldman Sachs posted its best quarterly numbers in a decade. The Wall Street trading powerhouse smashed earnings expectations as trading action rebounded sharply in the past three months. Goldman also got a boost from handsome fees tied to a number of high-profile initial public offerings it brought to market. Total revenues surged 30 percent last quarter. One other thing that helped - it only had to lay aside $278 million to cover potential loans that could go bad.
Things did not go as well at Bank of America. The second largest U.S. bank missed revenue forecasts. Unlike the other banks that have reported, its trading results were weak. And to compound its woes - Bank of America wasn't able to make up the difference due to its large loan portfolio, which is getting squeezed by record-low interest rates. Fearing future losses in its commercial lending business, the bank set aside $1.4 billion.
That was nothing compared to Wells Fargo. The major lender set aside $20.5 billion for loans to consumers and businesses that might not get repaid. Wells Fargo doesn't have major trading operations like many other banks to fall back on. And it is still paying the financial costs for a 2016 accounts scandal where employees opened millions of bogus accounts for customers. It paid out nearly a billion dollars in remediation fees last quarter. Profits at the nation's fourth largest bank missed forecasts.