On the surface, Goldman's just reported earnings that were significantly better than expected, with the central-bank controlling hedge fund announcing it had earned $4.57 in the third quarter, over a dollar above the $3.21 expected and also above the highest estimate, on revenues of $8.39 billion, half a billion above the $7.83 billion expected, while also announcing an increase in its dividend from $0.55 to $0.60.
The biggest revenue contributor was the pick up in FICC trading which was $2.17 billion, just below the $2.22 billion in Q2 and well above the $1.83 Bn expected.
Somewhat disappointing is that Goldman's prop group, Investing and Lending, generated just $1.692 billion, far below the $2.072 billion last quarter: so, do you see what happens Larry when the prop guys can no longer trade against Stolper's recos?
Nonetheless, the long-term trend in Goldman revenues is quite clear, and is shown on the chart below
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But the main reason why EPS soared is because Goldman did what it should do in a time of contracting revenues: it slashed compensation - the firm set aside "only" $2.8 billion for Compensation benefits, or a 33.4% comp margin, far below the 41% expected, and the 43% margin it had accrued last quarter.
As a result, despite the substantial beat in revenues and EPS, average employee comp actually fell modestly to $385,821 in Q3, although Goldman did boost total headcount from 32,400 to 33,500 in the third quarter, bucking the layoff trend seen at every other bank.
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