New Deal Announced
Shares in US banking firm Goldman Sachs are trading a little lower pre-market on Monday. Despite the weakness, Goldman’s share price has seen much better demand over recent weeks. Price has recovered from the September lows posted below the 190 level to trade back up around 207 currently.
Goldman recently confirmed that it will buy General Motor’s credit card business for $2.5 billion, having won the bidding over Barclays. The deal has now been agreed between Goldman and Capital One Financial Corp, GM’s credit card issuer, with terms set to be finalized over the next few weeks.
Focusing More on Consumer Banking
The deal marks the latest step by Goldman as part of a renewed focus on the group’s consumer banking business. Goldman has recently outlined plans to enhance its consumer banking business as a means of offsetting volatile results from other sections of its business such as trading and investment banking.
Compared with rivals such as JPMorgan and Citi, Goldman has a much smaller market share in the consumer banking world. David Solomon, Goldman’s CEO, has said this in an area the bank is now looking to aggressively enhance.
The move is an interesting one given that recent data shows that US households are cutting down on debt amidst the ongoing COVID-19 pandemic. With the latest data showing that new COVID cases are up by at least 50% in 5 US states, the risks of further local lockdowns are rising.
Q3 Results Due on Wednesday
Goldman was hit hard by the pandemic in Q2, recording second-quarter earnings per share of $0.55. This is well below analyst forecasts of a $3.90 reading. While earnings were lower over the quarter, revenues were higher by 41% year on year, at $13.30 billion.
Goldman is due to report its Q3 earnings on Wednesday. The market will be keen to see how the post lockdown recovery has translated, performance wise, for the bank. Wall Street is looking for an EPS of $5.54 which would mark a solid improvement on Q2.
Goldman Shares Approaching Trend Line Again
Following a brief dip below the 196.37 level, shares in Goldman have since recovered. Price is now trading back up towards the September highs. The big test for bulls now will be the bearish trend line from 2020 highs. If price can break above here, the focus will then shift to the 222.59 level resistance.
To the downside, any break below the 196.37 level will put the focus on a test of the 165.33 support next.