Goldman Sachs profit jumps 37% as bankers cash in on strong deal activity

Goldman Sachs' quarterly profit jumped more than 37 per cent on Tuesday as its investment bankers earned higher advisory fees and rallying markets boosted revenue from managing client assets.

 

The bank's prediction for a banner year for dealmaking has materialized as corporations revive plans for mergers and listings. 

Investment banking fees rose to $2.66 billion in the quarter ended September 30, compared with $1.87 billion a year ago.

 

ADVISORY FEES JUMP

 

The growth was fueled by a 60 per cent surge in advisory fees, while debt and equity underwriting fees also gained. Rival JPMorgan Chase also reported robust investment banking numbers earlier in the day.

 

Shares of the bank fell 1 per cent in premarket trading after the results.

 

"This quarter's results reflect the strength of our client franchise and focus on executing our strategic priorities in an improved market environment," CEO David Solomon said in a statement.

 

"We know that conditions can change quickly and so we remain focused on strong risk management," he said, echoing cautious optimism from JPMorgan CEO Jamie Dimon earlier in the day.

 

Global M&A volumes for the first nine months of the year crossed $3.43 trillion, with nearly 48 per cent of it in the US, according to data from Dealogic.

 

The period also saw the highest average M&A volume globally and in the US since 2015, in line with CEO David Solomon's prediction at last year's Reuters NEXT conference.

 

Goldman was among the joint book-running managers on marquee initial public offerings in the quarter, including design software firm Figma, Swedish fintech Klarna, and space tech firm Firefly Aerospace.

 

Overall quarterly profit stood at $4.1 billion, or $12.25 per share, compared with $2.99 billion, or $8.40 per share, a year ago.

"The capital markets machine has clearly shifted into a higher gear, with robust stock prices, a reduced regulatory burden and the prospect of lower interest rates likely to keep the momentum going," said Stephen Biggar, a banking analyst at Argus Research. 

Goldman executives have been increasingly optimistic around dealmaking in recent months, with Solomon saying in September it had one of its busiest weeks for IPOs in more than four years.

 

ASSET AND WEALTH MANAGEMENT FOCUS

 

Revenue from asset and wealth management rose 17 per cent to $4.4 billion, marking the first quarterly jump this year for the segment. This reflected record high management fees, as well as private banking and lending revenue.

 

The business is a key priority for Goldman as it seeks steadier revenue from fees, which offset the volatility in its advisory and trading businesses.

 

Goldman announced last month it will take a stake worth as much as $1 billion in T. Rowe Price, as part of a partnership to tap the asset manager's retirement money for alternative assets.

 

Assets under supervision climbed to $3.45 trillion, boosting management fees by 12 per cent.

 

Goldman set aside $339 million as provisions for credit losses, compared with $397 million a year ago. The provisions were mainly related to its credit card portfolio.

 

Its shares have climbed more than 37.4 per cent this year as of last closing price, making them the best performer among big US

banks.

 

SUSTAINED TRADING RESILIENCE

 

Wall Street trading desks have reaped rewards from record volatility as clients rejig portfolios to keep pace with changes in President Donald Trump's trade, foreign and fiscal policies.

 

The third quarter, however, remained one of Wall Street's calmest quarters in nearly six years as a interest-rate cut from the Federal Reserve and robust AI investment pushed major US

 

stock indexes to record highs.

 

Still, Goldman's equities trading revenue rose 7 per cent to $3.74 billion as investors took on more risk. Fixed income, currency and commodities hauled in $3.47 billion, 17 per cent higher than a year ago.