Interest rates help boost bank profits

Amy Scott Jan 21, 2010
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Interest rates help boost bank profits

Amy Scott Jan 21, 2010
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Bill Radke: Outside Goldman Sachs’ New York headquarters today, activists are preparing to protest. The bank is expected to announce another multibillion-dollar quarterly profit
this morning. Marketplace’s Amy Scott reports whether the public likes it or not, giant American banks have been thriving in the markets.


Amy Scott: All the banks have been helped by low interest rates.

Tim Ghriskey is with Solaris Asset Management. He says banks like Goldman Sachs borrow money cheaply from the Treasury and lend it out at much higher rates.

Tim Ghriskey: The investment banks even more so are benefiting from new issuance, both of equity and of debt, and from a pretty active merger and acquisition environment. And that’s where big profits come in the investment banks.

The banks had been making big profits in fixed-income trading — that is, bonds. But analyst Matt McCormick with Bahl & Gaynor says those profits slowed down last quarter.

Matt McCormick: Many of the other banks were light on fixed trading, mainly because a lot of the traders made their bonuses earlier in the year and they kind of pulled back the reins towards fourth quarter. I want to see if Goldman was the same. My guess is they were also light.

Goldman is expected to pay out in the neighborhood of $22 billion in compensation. Employees, though, will have to wait to learn what their share of that pool will be. Goldman says it’ll tell them next week.

In New York, I’m Amy Scott for Marketplace.

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