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.
Despite notching results that exceeded expectations, Chief Executive Officer David Solomon struck a cautious note on regulators' attempts to impose stiffer capital rules on banks.
"We continue to have concerns about the overall regulatory process," Solomon said on a conference call with analysts. "There remains a lack of transparency," he said, adding that "requiring too much capital increases the cost of credit for businesses large and small, and will impact growth across the country."
After jumping as much as 3.4%, the shares fell 1% at 10:37 a.m. in New York. The stock has posted the biggest gain among the top US banks this year, advancing 34%, and reached an all-time high Tuesday.
"Goldman Sachs must have finished strong in the third quarter, with revenue up 7% as they beat the street on just about every line," Evercore ISI analyst Glenn Schorr wrote in a note. "With rates set to come down further and the capital markets backdrop looking good, our gut is investors will continue to ride Goldman as one of the pure plays for the improving backdrop."
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.
