Goldman Sachs (GS.US) profits surged 45% under the catalyst of the US stock bull market! The stock trading business achieved the best performance in 3 years

The Zhitong Finance App learned that Wall Street financial giant Goldman Sachs Group (GS.US) released its third quarter earnings report in advance of the US stock market on Tuesday. Performance data showed that under the catalyst of the US stock bull market, the group's third-quarter profit soared 45%, mainly due to an unexpected sharp increase in revenue from Goldman Sachs's stock trading business, which is the “flag bearer of the bull market,” and the accelerated recovery of investment banking business. Goldman Sachs' Q3 net profit jumped sharply to $2.99 billion, a sharp increase of 45% year over year, while diluted earnings per share were $8.40, up 54% year over year. Goldman Sachs's total Q3 revenue increased 7% year over year, reaching US$12.7 billion, higher than the market's general expectation of US$11.8 billion. Stimulated by strong earnings reports, Goldman Sachs's pre-market share price rose by more than 3.5% on Tuesday.

The company's stock traders recorded their strongest quarterly results in more than three years, and Goldman Sachs's stock trading business is poised to achieve the best annual results ever. Meanwhile, Goldman Sachs's elite deal makers received more than expected commission fees from every key line of business. The profit of Goldman Sachs's investment banking division was moderated by the group's previous decline in fixed income transactions.

Investors have been pushing Goldman Sachs's stock price sharply this year, mainly because the financial giant has abandoned the major setbacks in its consumer banking business and is preparing to benefit from the recovery trend in Wall Street investment banking and the intense long-term bull market in US stocks. On Wall Street, financial giants such as Goldman Sachs have said that they can withstand the impact of lower interest rates on consumer retail businesses, while also emphasizing the potential for increased IPO business and merger and acquisition matching, which is expected to raise the cost benchmark for the entire industry.

Goldman Sachs shares rose the most this year among the top US investment banks, rising 36%, and hit a record high on Monday. Since this year, especially in the second half of the year, stock prices have soared, mainly due to rising expectations of a “soft landing” in the US economy, driving US stocks to continue to strengthen their bullish trend, which in turn pushes the stock prices of major Wall Street companies such as Goldman Sachs, Morgan Stanley, and Citi, which have significant shares in the US stock investment sector, to continue to rise.

The financial giant's results include breaking the credit card partnership with General Motors Co. (General Motors Co.) and abandoning credit operations related to other small retail businesses in the amount of $415 million. Barclays Bank said on Monday that after Goldman Sachs announced its failure in entering the consumer loan market, Barclays Bank would take over GM's related credit card business.

The Wall Street financial giant also spent a significant amount of time last year trying to abandon its much larger credit card partnership with Apple Inc. (Apple Inc.). If Goldman Sachs exits the partnership by selling its portfolio of loan assets at a discount, the business with an outstanding balance of around $17 billion could be hit even harder.

Goldman Sachs CEO David Solomon said last month that its money management department's revenue related to equity and debt investments could be described as slowing down drastically, especially as the group reduced the scale of balance sheet investments. This type of revenue is around $294 million, which can be described as a sharp slowdown from recent quarters — including a high of $1.2 billion at the end of last year.

Although Goldman Sachs's business priorities have been adjusted as the US stock bull market has become more intense, the bank has yet to reach its return on equity (ROE) target of around 15%. In the past 10 quarters, the group has only reached this target once. In the three months ending September, the New York-based financial giant announced a return on equity of around 10.4% — an indicator that tracks the specific profit of the bank's shareholders' equity investments.

According to detailed performance data, the overall business revenue of Goldman Sachs Group's entire stock trading division reached US$3.5 billion in the third quarter, the best performance since the first quarter of 2021, up 18% year-on-year and 10% month-on-month — previously achieving strong growth in the second quarter. Goldman Sachs Group attributed the sharp increase in intermediary revenue for equity-related derivatives and cash-type products in its financial report.

The revenue scale of Goldman Sachs's Q3 fixed income trading business fell 12% year over year to US$2.96 billion, mainly due to a marked cooling in interest rate related transactions during the interest rate cut cycle and a sharp drop in commodity business revenue. In August, the group said that Qin Xiao, the co-head of the commodities business, left the company after only a few months in office, and that business growth had already slowed drastically at the time.

Goldman Sachs's investment banking revenue for the third quarter was approximately US$1.87 billion, exceeding analysts' average expectations of US$1.68 billion. The merger and acquisition advisory fee for the same period was approximately US$875 million. Goldman Sachs previously lagged behind its rivals in the second quarter, but is now surpassing its main competitor J.P. Morgan Chase on this metric.

Goldman Sachs's stock underwriting business revenue in the third quarter was about US$385 million, a sharp increase of 25% over the previous year, reflecting the continued strong recovery process of the Wall Street investment banking business; Goldman Sachs debt underwriting business revenue in the third quarter was approximately US$605 million.

In the third quarter, the overall revenue of Goldman Sachs's asset and wealth management-related business was approximately US$3.75 billion, up 12% year over year. In the third quarter, Kaga Group's management expenses increased by about 9%. The group reports that it has raised $16 billion in alternative businesses, most of which is linked to credit-related strategies.

The consumer platform business is known as a “bad debt bank” within Goldman Sachs. The revenue of this business type fell by about 32% to US$391 million due to losses related to the withdrawal of businesses linked to GM, leading to losses before taxes related to Q3 of approximately US$559 million.