Goldman Sachs Tops Third-Quarter Earnings Estimates as Stock Trading Surges 72%

Goldman Sachs Group Inc. (NYSE:GS) reported third-quarter earnings per share of $17.01, up from $12.25 a year earlier and easily topping the $13.08 Wall Street consensus estimate. The strong results were propelled by a surge in stock trading, where revenue jumped 72% year-over-year to $6.44 billion, significantly exceeding expectations of $5.09 billion. High client activity in derivatives and prime financing, which involves lending to hedge funds, drove the gains on the equity desk, while investment banking fees also rose 21% to $3.22 billion.

The quarter highlighted a distinct division between stock desks and fixed-income desks across major financial institutions. Goldman Sachs Group Inc. (NYSE:GS) bond trading revenue was unchanged from a year ago at $3.47 billion, falling short of the $3.72 billion estimate due to lower performance in credit, mortgages, and interest-rate products. Similar trends appeared at JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Co. (NYSE:WFC), but Goldman Sachs Group Inc. (NYSE:GS) benefited most because stock trading accounts for approximately 34% of its revenue, compared to 10% at JPMorgan Chase & Co. (NYSE:JPM) and 2% at Wells Fargo & Co. (NYSE:WFC).

Investors will watch whether strength in stock trading can offset weaker fixed-income activity into the final quarter of the year. Market participants will also monitor results from Morgan Stanley (NYSE:MS), which reports earnings on Wednesday, to see if equity trading momentum extends across the industry.