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
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.