NEW YORK — Goldman Sachs’ earnings soared in the third quarter, driven largely by trading and investment gains. The results easily surpassed analysts’ estimates.
The New York-based company said Tuesday that it earned $2.1 billion, or $4.88 per share, up from $1.33 billion, or $2.90 per share, in the same period a year earlier. Wall Street analysts were expecting Goldman to earn $3.82 a share, according to FactSet.
While the firm’s investment banking division reported flat revenue, Goldman’s trading desks and the division where it invests its own money did exceptionally well.
Revenue in Goldman’s fixed income, currencies and commodities division jumped 34 percent to $1.96 billion. Goldman benefited from similar forces that helped boost trading of other major Wall Street banks, including JPMorgan Chase, Citigroup and Bank of America.
Wall Street banks benefited from volatility in bond and currency markets in the third quarter as Britain voted to leave the European Union, sending the pound swinging wildly, and as investors tried to guess when the Federal Reserve will begin raising interest rates.
The firm’s return on common equity, a measure of profitability that is closely watched by analysts, was a strong 11.2 percent in the quarter.
“We saw solid performance across the franchise that helped counter typical seasonal weakness,” said Goldman Sachs CEO Lloyd Blankfein in a prepared statement.
Goldman’s investing and lending division, where the firm puts its own money into a myriad of investments from stocks, bonds and venture capital, had a strong quarter as well. Revenue there rose to $1.4 billion from $670 million.
The firm set aside $3.21 billion to compensate its employees, up 36 percent from a year earlier, which is not a surprise with how well Goldman’s trading and investment businesses did. Goldman’s staff are largely paid in bonuses that accumulate throughout the year, and it’s generally the firm’s largest expense each year.
Goldman shares rose 1.5 percent in pre-market trading.
Ken Sweet covers banks and consumer financial issues for the AP. Follow him on Twitter at @kensweet.
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