Goldman Sachs thrives on global dealmaking frenzy to post bumper profit

Goldman Sachs Group Inc reported a 66% surge in third-quarter earnings that swept past expectations on Friday, as Wall Street's biggest investment bank rode a record wave of M&A activity that has also boosted profit for other big US banks.

Net earnings applicable to common shareholders rose to $5.28 billion in the quarter ended Sept. 30, from $3.23 billion a year ago.

Earnings per share rose to $14.93 from $8.98 a year earlier. Analysts on average had expected a profit of $10.11 per share, according to the IBES estimate from Refinitiv.

Goldman, which generates a third of its revenue from its investment bank through lucrative fees from advising on deals, reported a surge in advisory fees, as large companies and financial sponsors embarked on a slew of transformative deals.

Total revenue surged 26% to $13.61 billion in the quarter.

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Global M&A volumes have shattered all-time records, with advisors struggling to cope with transaction volumes never seen before.

Deals worth more than $1.5 trillion were signed by the world's biggest investment banks in the September quarter, with Goldman comfortably topping the league tables for worldwide M&A advisory, as per Refinitiv data.

The league tables rank financial services firms on the amount of M&A fees they generate.

Overall financial advisory revenue jumped 225% to $1.65 billion, while underwriting revenue surged 33% to $1.90 billion.

Goldman's investment bank had its second best quarter ever, with revenue of $3.70 billion, driven by strength in advisory and underwriting fees.

The global markets business, which now houses the trading business and accounts for roughly 41% of overall revenue, reported revenue of $5.61 billion, up 23%.

Unlike rivals such as JPMorgan and Bank of America , Goldman has a relatively smaller consumer business, which has limited its exposure to loan defaults and allowed it to focus on investment banking.

With dealmakers the world over drowning in a flurry of deals, Goldman also cashed in big-time as companies rushed to raise capital, refinanced debt and sold new stock.

Shares of the investment bank were up nearly 2.5% in premarket trading.