Goldman Sachs profit gets big boost from bond market pickup

[October 16, 2014]  (Reuters) - Goldman Sachs Group Inc reported a 50 percent jump in third-quarter net profit on Thursday as last month's sudden pickup in bond market activity helped to boost trading revenue.

Net income attributable to common shareholders rose to $2.14 billion, or $4.57 per share, in the three months ended Sept. 30 from $1.43 billion, or $2.88 per share, a year earlier.

Analysts on average had expected earnings of $3.21 per share, according to Thomson Reuters I/B/E/S. It was not immediately clear whether the reported figure was comparable.

Revenue from bond-trading, a notoriously volatile business, increased 74 percent to $2.17 billion as strong U.S. economic data, stimulus measures by the European Central Bank, and the surprise exit of trading superstar Bill Gross from giant bond-trading firm Pimco jolted what had been a listless market.

But Goldman's fixed-income, currency and commodities (FICC) business has been on a declining trend since 2009 as new rules discourage banks from trading on their own book, and many in the industry wonder whether the business will ever truly rebound.

The FICC business contributed about 26 percent of overall revenue in the latest quarter, compared with about 40 percent of annual revenue in 2009 and 25 percent last year.

The bank, also one of the biggest beneficiaries of the resurgence in equity capital markets this year, said revenue from equity underwriting rose 54 percent to $426 million.

Goldman ranked No. 1 for both equity underwriting and advisory services in the first nine months of 2014, according to Thomson Reuters data, helped by its work on big deals including the $25 billion IPO of Alibaba Group Holding Ltd.
 

Goldman's shares were down 1.5 percent at $174.50 in premarket trading. Global equity markets have been on a slide in recent days on worries about the health of the global economy, and bank shares have been hit hard.

"The combination of improving economic conditions in the U.S. and a strong global franchise continued to drive client activity across our diverse set of businesses," Chairman and CEO Lloyd Blankfein said in a statement, while acknowledging that "conditions and sentiment can shift quickly."

The bank's total net revenue rose 25 percent to $8.39 billion.

(Reporting by Tanya Agrawal and Lauren Tara LaCapra; Editing by Ted Kerr)

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