Goldman Stock Traders Head to Record, Fuel 45% Profit Jump

(Bloomberg) -- Goldman Sachs Group Inc. profit soared 45% in the third quarter on a surprise increase in equity-trading revenue and a resurgent investment-banking business. 

The firm’s stock traders recorded their best quarter in more than three years, on track for their best year ever, while dealmakers pocketed fees that exceeded estimates across every key business line. The investment bank’s gains were tempered by a slide the firm had previously telegraphed in fixed-income trading.

Investors have been sending Goldman shares higher this year as the bank abandons major parts of its consumer-banking push and positions itself to benefit from a rebound in investment banking. Across Wall Street, big banks are showing they can fend off headwinds in their retail businesses from the reduction in interest rates, while highlighting the potential for increased dealmaking that would lift fees across the industry.

Goldman shares have posted the biggest gain among the top US banks this year, advancing 36%, and they reached an all-time high on Monday. The stock jumped 3.3% at 8:03 a.m. in early New York trading.

The bank’s results included a $415 million hit tied to severing the firm’s credit-card partnership with General Motors Co. and jettisoning other small retail ventures. Barclays Plc said Monday it’s taking over the GM business after Goldman fumbled its foray into consumer lending. 

The Wall Street firm has spent much of the last year trying to drop its much bigger card tie-up with Apple Inc. That book of business, which has about $17 billion in outstanding balances, could suffer a steeper hit if Goldman exits the partnership by selling the loans at a discount.

Chief Executive Officer David Solomon last month flagged a significant slowdown in revenue tied to equity and debt investments in its money-management unit, particularly as the bank pares back investing from its balance sheet. That revenue was $294 million, a sharp slowdown from recent quarters, including the more than $1.2 billion at the end of last year.

Net income jumped to $2.99 billion, or $8.40 a share. Revenue climbed 7% to $12.7 billion.

Despite the winnowed focus in its business, the bank is still shy of its mid-teens return-on-equity target, having only hit that mark once in the past 10 quarters. In the three months through September, the New York-based firm posted a 10.4% ROE — a measure that tracks how profitably the bank invests shareholder equity.

The stock-trading unit logged revenue of $3.5 billion, its best showing since the first quarter of 2021. The firm credited significantly higher intermediation revenue in derivative and cash products.

Revenue from the fixed-income trading business slipped 12% to $2.96 billion, as it flagged lower revenue in rates and commodities. In August, the bank said the co-head of its commodities business, Qin Xiao, was leaving after just a few months in the role at a time when gains in that business have slowed.

Investment-banking revenue of $1.87 billion compared with analysts’ average estimate of $1.68 billion. Merger-advisory fees were $875 million. Goldman jumped out in front of JPMorgan Chase & Co. on that metric after falling behind its rival in the second quarter.

Its equity-underwriting business posted revenue of $385 million and debt-underwriting revenue was $605 million.

Goldman’s asset- and wealth-management business posted revenue of $3.75 billion, up 16% from a year earlier. Management fees climbed 9%. The bank reported $16 billion of fundraising in the alternatives business, mostly tied to credit-related strategies.

The consumer-platforms business, dubbed the bad bank within Goldman, recorded a 32% drop in revenue to $391 million, driven by the GM card exit and resulting in a pretax loss of $559 million.