Goldman Sachs reported a 66-percent surge in third-quarter earnings that swept past expectations on Friday, as Wall Street’s biggest investment bank rode a record wave of M&A activity that has also boosted profit for other big US banks.
The Wall Street giant headed by Chief Executive David Solomon, which generates a third of its revenue from its investment bank through lucrative fees from advising on deals, reported a surge in advisory fees, as large companies and financial sponsors embarked on a slew of transformative deals.
Net earnings applicable to common shareholders rose to $5.28 billion in the quarter ended Sept. 30, from $3.23 billion a year ago.
Earnings per share rose to $14.93 from $8.98 a year earlier. Analysts on average had expected a profit of $10.11 per share, according to the IBES estimate from Refinitiv.
Total revenue surged 26 percent to $13.61 billion in the quarter
Global M&A volumes have shattered all-time records, with advisors struggling to cope with transaction volumes never seen before.
Deals worth more than $1.5 trillion were signed by the world’s biggest investment banks in the September quarter, with Goldman comfortably topping the league tables for worldwide M&A advisory, as per Refinitiv data.
The league tables rank financial services firms on the amount of M&A fees they generate.
Overall financial advisory revenue jumped 225 percent to $1.65 billion, while underwriting revenue surged 33% to $1.90 billion.
Goldman’s investment bank had its second-best quarter ever, with revenue of $3.70 billion, driven by strength in advisory and underwriting fees.
The global markets business, which now houses the trading business and accounts for roughly 41 percent of overall revenue, reported revenue of $5.61 billion, up 23 percent.
Unlike rivals such as JPMorgan and Bank of America, Goldman has a relatively smaller consumer business, which has limited its exposure to loan defaults and allowed it to focus on investment banking.
With dealmakers the world over drowning in a flurry of deals, Goldman also cashed in big-time as companies rushed to raise capital, refinanced debt and sold new stock.
Shares of the investment bank were up nearly 2.5 percent in premarket trading.