Goldman Sachs Profit Surges, Fueled by Dealmaking Boom

Goldman Sachs building in New York - John Taggart for WSJ

Goldman Sachs reported a stronger-than-expected profit in the third quarter, with the bank now on pace for its best year ever in its main investment-banking and markets division.

The Wall Street giant’s profit jumped 37% to $4.1 billion in the quarter. That amounted to $12.25 a share, surpassing the $11.03 a share analysts expected.

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Revenue rose 20% to $15.18 billion, also topping analyst expectations.

Wall Street’s engines are gaining steam thanks to a booming stock market and growing appetite in corporate boardrooms and executive suites to pursue mergers or public offerings.

Financing activity is surging in large part because mergers are on the rise and buyers are relying on borrowing to execute those deals. There is a pickup in private-equity deals, including the record $55 billion for Electronic Arts that Goldman advised on last month. Then there are the massive investments occurring in artificial intelligence, building out data centers and other infrastructure.

Still, Chief Executive David Solomon said the bank was being cautious about the enthusiasm.

“Taking a step back, there is no question there’s a fair amount of investor exuberance at the moment,” Goldman’s Solomon said. “While I feel good about the forward outlook on balance, the market operates in cycles and disciplined risk management is imperative. We are especially vigilant in times like these.”

Goldman is now planning another round of layoffs, according to people familiar with the matter.

The Wall Street giant will cut jobs with a focus on lower performers, according to people familiar with the matter. Goldman employees on Tuesday received a memo signed by the firm’s top brass including Solomon that the firm “will constrain head count growth through the end of the year” and that it will conduct “a limited reduction in roles across the firm.”

Goldman’s global banking and markets division, its biggest group, has posted record revenue through the first nine months of the year.

Industrywide, mergers and capital raises are having their best year so far since record-setting 2021, according to Dealogic. The Federal Reserve’s move to lower interest rates is likely to add to dealmaking by making it more appealing for clients to borrow to buy a company.

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The deals market helped spur one of the busiest Septembers in debt markets that bankers said they remember.

Industrywide, debt-capital-markets activity and lending to companies are surging and Goldman’s revenue from debt underwriting was up 30% in the third quarter from the prior year.

A relatively calm summer prompted many companies to refinance their existing debt. Some bankers advised clients to refinance now rather than waiting for interest rates to drop further, warning of the possibility for geopolitical or other macroeconomic factors to emerge in the next year or two.

Investment-banking revenue in the third quarter surged 42%, driven by advisory fees.

Trading revenue was up 12% from a year ago, helped once again by the firm’s lending to institutional clients.

The bank reported yet another record revenue in equities financing, which largely reflects financing to hedge funds seeking to borrow for their own trading. It also reported a 9% revenue increase in what it calls FICC financing, that is tied to a range of loans it makes to institutional clients.

Write to AnnaMaria Andriotis at [email protected]

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