Goldman's $18.7 Billion Quarter Splits Wall Street's Earnings Week

Goldman Sachs just posted its second-highest quarterly net revenue ever — $18.68 billion — while JPMorgan and Bank of America both missed analyst estimates in a week that split Wall Street into clear winners and laggards.

Goldman's third-quarter revenue beat expectations of $16.71 billion by nearly $2 billion, and earnings per share of $17.01 crushed the $13.02 consensus. CEO David Solomon called it a "very strong performance." The engine was the equities desk, where revenue surged 72% year over year.

What went wrong at JPMorgan?

JPMorgan set the disappointing tone early Tuesday. For the first time in nearly three years, the nation's largest bank by assets and market capitalization — about $888.1 billion — fell short on both profit and revenue. Net revenue came in at $50.17 billion versus the $51.22 billion analysts expected. Earnings per share was $5.57 against a $5.90 consensus, according to S&P Global Market Intelligence.

Two factors drove the miss. Fixed-income trading revenue fell 4% year over year to $5.4 billion, roughly $550 million below expectations, and non-interest expenses ran $90 million above estimates as costs jumped 12% over the past year. Total revenue grew just 8%, a sharp slowdown from the 27% surge in the second quarter.

CEO Jamie Dimon didn't directly address the miss but said in a statement the bank delivered "another quarter of strong results," while noting investment banking activity "moderate[d] somewhat during the quarter." On a call with reporters, CFO Jeremy Barnum described the dealmaking pipeline as "very, very strong."

How bad was Bank of America's week?

Bad, and it got worse. On Wednesday, Bank of America snapped a six-quarter streak of beats as profit fell 17% to $6.93 billion, or 91 cents per share. Revenue missed estimates by roughly $570 million.

The results landed a day after regulators announced a $1.2 billion penalty alleging the bank failed to report billions of dollars in suspicious transactions.

Wells Fargo also lagged, reporting revenue of $21.87 billion against a $22.31 billion consensus — its third top-line miss in the past four quarters, even though it beat on earnings.

Why did Goldman win where JPMorgan lost?

Business mix. Both banks compete for M&A and IPO mandates, but Goldman leaned on its enormous equities desk to offset weakness in fixed income. JPMorgan's broader, more diversified model exposed it to the fixed-income slump without an equally explosive offset. Morgan Stanley followed Goldman's playbook with gains in equities trading lifting profit and revenue above expectations. Citigroup beat on both lines with its best third-quarter revenue in a decade.

Is the consumer actually fine?

Strip away the mixed results and one message united every management team: the U.S. consumer is holding up despite higher rates and persistent inflation.

Citi CEO Jane Fraser said "the consumer is still driving much of the [economic] growth," adding that "the labor market is stable, and companies remain active." Wells Fargo CEO Charlie Scharf pointed to rising consumer spending, low loan-delinquency rates and growing deposit balances. "While economic uncertainty exists and consumer sentiment remains mixed, our data shows that our consumer and business customers are doing well," he told analysts.

Tom Essaye, founder and president of Sevens Report Research, agreed. "Despite high prices, despite anxiety about wars, despite all the negative stuff that's forming around the consumer, they just keep on trucking and are continuing to spend consistently," he told Fortune.

What's the big question going forward?

Whether that resilience survives the rate cycle. The Federal Reserve raised rates in September for the first time in three years, and inflation remains elevated, driven partly by surging energy costs tied to the Iran war.

Wells Fargo analyst Mike Mayo, head of U.S. large-cap bank research, framed it plainly for Fortune: "What happens as a result of much higher interest rates? That's the big question."

CFRA's Alexander Yokum acknowledged the results were solid and management tone was optimistic, but flagged credit risk ahead given sticky inflation and expected further rate hikes. "When rates go up, something often breaks. Last cycle, it started with the Silicon Valley Bank collapse, right? And then there were commercial real estate issues also," said Yokum, a senior vice president of equity research at CFRA. "It's hard to say what it will be this cycle, but it's hard for me to believe that rates can rise significantly and all the banks will be fine."

His concern, he said, is "more the future" — though this time, he noted, the banks enter that future well capitalized. For practitioners, the read is straightforward: trading desks carried the quarter, credit carried the risk.