Goldman Smashes Expectations As Trading, Prop Revenues Surge, "Average" Employee Makes $322,607

Tyler Durden's picture

After the rest of the major US banks posted solid beats, mostly on the back of a strong rebound in markets-driven revenue, there was little concern that Goldman - the pure-play trading powerhouse (at least until the recent launch of a retail lending and deposit operation) would likewise surpass Wall Street's expectations, and moments ago that was confirmed when Goldman reported EPS of $4.88, smashing expectations of $3.86, as profit jumped 47% from a year ago to $2.1 billion. The profit beat was driven by a 19% spike in revenue which rose from $6.9 billion to $8.2 billion, beating consensus estimates of $7.6 billion.

Goldman said its return on equity stood at 11.2% in the third quarter. It was 7% in the year-earlier quarter and hadn’t exceeded 10%—the firm’ theoretical cost of capital—since early 2015.

The main reason for the rebound was a 34% surge in FICC revenue, which jumped from $1.461 billion to $1.784 billion, as well as surge in the firm's prop trading aka "Investing and Lending" revenue, soaring by 109% to $1.398 billion in Q3. A notable outlier on an otherwise pristeen report was the 12% decline in Commissions and Fees, which declined to $719 million, and suggested that traditional methods of generating trading revenue continue to fade.

Also notable is that Investment Banking revenue dipped by 1% to $1.5 billion as a result of the recent scarcity in blockbuster M&A deals.

Some other details from the report:

  • Q3 trading rev. $3.75b vs est. $3.39b (Bloomberg survey of 5 ests.)
  • FICC $1.96b vs est. $1.70b (Bloomberg survey of 5 ests.)
  • Equities $1.78b vs est. $1.69b (Bloomberg survey of 5 ests.)
  • 3Q i-banking $1.54b vs est. $1.47b (Bloomberg survey of 6 ests.)
  • Financial advisory net rev. $658m, down 19% y/y, reflecting decrease in industry-wide completed M&A
  • Underwriting net rev. $879m, up 18% on higher debt underwriting
  • Investment banking transaction backlog increased q/q, was lower y/y

On the expense side, Goldman's compensation benefits accrual for Q3 declined modestly from Q2, but rose 36% from a year earlier to $3.2 billion.

  • Operating expenses $5.3b, 3% lower q/q
  • 3Q compensation expense $3.21b vs $3.33b q/q

The company also reported an effective income tax rate 26.9% for first 9 months vs 26.8% in 1H, and said it had bought back 7.8 million shares during 3Q for total $1.27 billion.

The best news for Goldman employees, however, is that after several quarters of decline, the average employee compensation on an LTM basis rebounded strongly from just under $300k To $322,607, the highest so far in 2016. And also worth a note: after a sharp headcount reduction in Q2 of 2016, the firm's first major culling in years, in Q3 total staff once again posted a modest increase, rising by 100 workers to 34,900.

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CuttingEdge's picture

The only kind of "average Americans" Hillary loves.

StackShinyStuff's picture

Doing the opposite pays pretty well.  I'll have to try that.

SomethingSomethingDarkSide's picture

All of the TBTF Banks got into the same trades and blasted them out of the water with help from the Central Banks:

- Bullion Beat Down

- Dollar Ascension

LadiesLoveCoolJames's picture

The Goldman smugness level just reached infinity!

BorisTheBlade's picture

Bullish for hookers and blow?

stocktivity's picture

I hate seeing this!!!  Fuck the 1%

illuminatus's picture

Doing god's work pays well, that's all.

GRDguy's picture

Especially the god that says it's okay to lie and steal from everyone.

Baby Eating Dingo22's picture

Hooray!!
Hats off to these fine fellas

VinceFostersGhost's picture

 

 

The Muppets send their respect.

VinceFostersGhost's picture

 

 

Don't ask me what I think about you....I might not give you the answer that you want me to...

https://www.youtube.com/watch?v=wKjfjO2Y1H4

DavidC's picture

Results (ooh, beating analysts' expectations, there's a surprise) tells one where a company has BEEN, NOT where it's going.

DavidC

1st Amendment's picture

Prop trading revenue up 109% ... somebody wake up Volker

Pol Pot's picture

A monkey can make money when they can barrow at 0%........add in that laws do not apply to you and that there is no risk for having a major loss because it is backstoped by the tax payer and you have a perfect receipe for making oodles of money.
It's good to be in the tribe.....

VinceFostersGhost's picture

 

 

A monkey can make money when they can barrow at 0%

 

Well....they gave to us....what did you think we we're gonna do?

StackShinyStuff's picture

Says their theoretical cost of capital is 10%.  Spit out my coffee at that one.  And my theoretical income is $10 million per year.

BorisTheBlade's picture

Doable. Leverage 9 to 1, cost of equity 100%, debt 0%. Hence the buyback.

Pol Pot's picture

Actually they gave it to themselves via their control over congress....congress....the corrupt rat assholes they are...turned around and gave it to the tax payer...while the tax payer was on wounded knees...they stuck it right up our backside.....and we begged for more...

buzzsaw99's picture

client flow = fist fuckin' da muppets

nightwish's picture

Is what happens when jews at the highest levels of govt and the fedres help goldman out

Think soros got trillions because he's so 'smart', or his being right so often is due to incredible luck? think again

JailBanksters's picture

If it sounds to good to be true, then it probably is.

I think what this means is, Goldman are back to committing large scale fraud again.

All you got to do, is work out what the scam is

There is No way they can make such a profit without committing fraud somewhere, they're stealing from somebody somewhere.

hangemhigh77's picture

That's pretty damn good for a company that should have ceased to exist in 2009. Burn the Fucking place down and hang all of these fucking crooks.

wobblie's picture

Not surprising for an entity running much of the world. AND they are a zombie bank to boot!

It only makes sense.

https://therulingclassobserver.com/2016/10/14/profit-logic/

Grandad Grumps's picture

Sure. life is easy for Satan's banker when they have purchased laws that allow them to steal from the general population and the governments of the world.

overmedicatedundersexed's picture

small investments in sec clinton $600,000...big returns aka billions  ..funny how that works.

GunnerySgtHartman's picture

If this isn't proof that the goal of the central banks is to prop up traders and brokers so they can keep making their Lamborghini payments, I don't know what is!

TheVoicesInYourHead's picture

No surprise here.

Almost all the bank analysts rig the earnings on the big banks so that they seldom miss.

GS earnings today were already baked into the stock price two years ago.

Seasmoke's picture

Free Jon Corzine !!!! And give Hank Paulson another tax free $500,000,000 too !!!!

Chippewa Partners's picture

The SQUID at work.  Greg Smith will miss out on a record bonus.  

 

Lots of sheep that don't have a clue how they are being milked.

SheepDog-One's picture

Should be quite easy to make money when you have carte blanche freedom to just move the decimal points wherever you want!

Seasmoke's picture

I have $26 I would like to open up a Goldman Sachs checking account with. Anyone know where the nearest branch office is ?????

JailBanksters's picture

They have 1 Branch in UTAH and 1 Branch in NY

 

SoDamnMad's picture

What happens when the world financial system collapses?

For extra credit:

Does Goldman have a bunker in Paraguay where all transactions are run in parellel?  If NYC takes a 50 megoton hit from a Russian sub, their records need to be protected so that they will know what profits are and what bonuses staff in NYC would have earned had they survived the blast?

SheepDog-One's picture

Phony prop traders revenue surging like a broken fire hydrant, while wages for everyone else have been stagnant for decades.....burn this POS down!

illuminatus's picture

But hey it's only money.

Wow72's picture

There really is no question where all the fake "money" is consolidating to? No real mystery here?

bankbob's picture

For our next trick... the FED will conjure money out of thin air and make it appear in wallets at Goldman Sachs.

Heavenlysunshine's picture

What good was all their money to the six million in Auschwitz ?

back to basics's picture

I'd rethink that 6 million number if I were you.

white horse's picture

This average is meaningless.

adonisdemilo's picture

I wonder how much they made shorting the GBP/USD because I'm pretty sure they were told by Carney that he was going to reduce the interest rate.

Teresa May has to get rid of him because he isn't working in our interests.

GTC's picture

anyone can make that kind of cash when you use the governments cash to minipulate the metals market.