Goldman Sachs Beats Profit Expectations In 3Q

Goldman Sachs Group Inc. (NYSE:GS) handily beat Wall Street expectations as its quarterly earnings rose 47 percent. The bank reported a profit of $2.09 billion, or $4.88 a share, up from $1.43 billion, or $2.90 a share, reported in the same period last year. Revenue rose 19 percent to $8.17 billion from $6.86 billion a year earlier. Analysts polled by Thomson Reuters expected $3.82 a share on revenue of $7.42 billion.

The firm’s trading division bounced back from a slow start to 2016. Trading revenue rose 17 percent to $3.75 billion from $3.21 billion in the same quarter last year. Fixed income, currency and commodity trading revenue rose 34 percent to $1.96 billion, excluding an accounting adjustment. Stock-trading revenue rose 2 percent to $1.78 billion, while revenue from investment banking fell 1.2 percent to $1.54 billion. Trading typically makes up half of Goldman’s revenue.

Goldman reported revenue of $658 million from its mergers and acquisitions business during the third quarter, down 19 percent from $809 million a year ago. Debt-underwriting revenue rose 17 percent to $652 million from $557 million last year. Fees on initial public offerings and other stock sales rose 19 percent to $227 million.

Revenue from Goldman’s investment-and-lending arm rose to $1.4 billion, more than double from a year earlier. The firm’s investment management arm reported a 4.4 percent increase in revenue, rising to $1.49 billion. The firm’s return on equity rose to 11.2 percent in the third quarter, up from 7 percent a year ago.

Goldman’s non-compensation expenses fell 15 percent from the same quarter a year ago. Compensation expenses have risen to 39 percent of revenue, versus 34 percent a year ago. Conversely, Goldman’s employee ranks are down 5 percent from a year ago. The firm has eliminated several hundred jobs this year, including investment bankers in Asia and traders in New York and London.

CEO Lloyd Blankfein said in a statement, “We saw solid performance across the franchise that helped counter typical seasonal weakness.” He continued, “We continue to manage our balance sheet conservatively and are benefiting from the breadth of our offerings to clients.”

Goldman shares climbed 2.4 percent after the release of the earnings announcement. The company’s shares have risen nearly 14 percent since the end of the second quarter, but remain down 6 percent year to date.