What's going on?

Goldman Sachs and Bank of America (BoA) became the latest investment banks to report positive third-quarter results on Wednesday � but while Goldman�s stock climbed, BoA�s slithered down 4%.

What does this mean?

Goldman beat investors� expectations across the board. Facilitating clients� trades of �FICC� investments � fixed income (like bonds), currencies, and commodities � as well as advising them on all manner of deals helped revenue come both thick and fast. That led to the firm reporting a much higher profit than predicted too.


BoA wasn�t quite as lucky. Its quarterly revenue was slightly more constricted than investors had forecast, although profit was more or less as planned � partly thanks to the new trend of banks putting less money aside in case of loan defaults. But given 84% of companies exceeded earnings expectations last quarter, merely doing as well as predicted didn�t satisfy investors hungry for a so-called �beat and raise�.

Why should I care?

For markets: Sustaining a sidewinder.

BoA seems to have missed out on the FICC trading boom � its business grew just 4% versus the same time last year, compared to Goldman�s 49% and JPMorgan�s 50%. What�s more, consumer banking � think savings and lending � is more important to BoA�s earnings than it is for rivals. Record-low US interest rates squeezing the amount the bank makes from loans by more than feared therefore added insult to injury � and perhaps encouraged investors to forgo patriotism in favor of profits.

The bigger picture: Change is what we do.

It�s tough right now being a bank like BoA or Citigroup, relying heavily on consumer and business loans to make money. As well as earning less interest than before, they�re on the hook for major losses if struggling customers fail to repay. Riskier activities like trading have been better bets for banks recently, and that probably won�t change this quarter: next month�s US election is expected to lead to a lot of investor chopping and changing.