US banks beat forecasts

US Bank Profits

There are two banks on Wall Street for whom the global financial crisis is fast becoming a distant memory.

Goldman Sachs' profits for the period were $3.19 billion, a four-fold increase from the same period in 2008. It has now set aside $5.35 billion to cover pay and bonuses for the quarter, an average payout of $172,581 per worker.

Just down the street, Citigroup also posted a growth in profits, albeit by a much lower figure of $101 million - reflecting the impact of the recession on its High Street banking operation.

Goldman focuses mostly on investment banking, which may account for the fact that Citi has more bad debts and is more exposed to consumer loans. In the same period a year earlier, Citigroup had made a loss of $2.82 billion. But its latest profit figure was significantly lower than the previous quarter, when it made $4.82 billion.

Citi is still partly state-owned and since the start of the financial crisis has written off over $100 billion of assets.

Goldman insist such an improvement in profits is indicative of a general recovery, saying that there were now signs of "improving conditions and evidence of stabilisation" in the world economy. Speaking about the company's decision to award such high bonuses Ralph Silva from Tower Group told BBC News, "Goldman has always been the biggest bonus payer simply because its people make more money per person than anyone else."

"The problem here is fundamental, it is a very complex business. There are very few people in the world who have the ability to do this job so the reason they get paid so much is there is just not enough of them," she added.

The company have already repaid the emergency loan received from the government, and has actually come through the recession quite well, partly because it stays away from the sort of reckless mortgage lending that was majorly responsible for the credit crash.

Its currency, commodity and bond trading fared particularly well in the third quarter.

The Bank of America is due to report its results on Friday, while Morgan Stanley results will be out on Wednesday 21 October.

However, the US consumer credit environment remains challenging; so both consumers and businesses should remain cautious, and not take the latest figures as a sign that we are out of the woods just yet.

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