Goldman results top Wall Street view on smaller drop in bond trading

(Reuters) - Goldman Sachs Group Inc GS.N beat Wall Street estimates on a smaller-than-expected revenue decline at its struggling bond trading unit, gains in its private equity investments and higher fees from dealmaking.

FILE PHOTO: The logo of Dow Jones Industrial Average stock market index listed company Goldman Sachs (GS) is seen on the clothing of a trader working at the Goldman Sachs stall on the floor of the New York Stock Exchange, United States April 16, 2012. REUTERS/Brendan McDermid/File Photo

Shares of the bank rose 1.07 percent to $245 in premarket trading.

Bond trading revenue fell 26 percent on subdued market volatility, but was much better than analysts’ expectations. Goldman reported a 40 percent slump in bond trading in the second quarter.

“After two quarters in a row severely missing Wall Street’s bond trading estimates, Goldman’s 26 percent decline did not look so bad, said Oppenheimer analyst Chris Kotowski.

“While we did not see a sharp rebound in (bond) trading, one can, at a minimum, say that this quarter Goldman looked pretty much like everyone else,” Kotowski wrote in a note to clients.”

Revenue from trading bonds, currencies and commodities (FICC) fell to $1.45 billion.

Goldman’s major Wall Street rivals reported quarterly bond trading declines of 16 to 27 percent ahead of its report.

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The bank’s core bond-trading unit has suffered three straight quarterly declines on low volatility and the bank has been looking for ways to shore up its FICC division.

Goldman has been trying to shift away from the bond-trading unit to more stable businesses like investment management and consumer lending, where it launched Marcus, an online platform in 2016.

Net income applicable to common shareholders was $2.04 billion, or $5.02 per share, for the third quarter ended Sept. 30, compared with $2.10 billion, or $4.88 per share a year ago.

Analysts on average had expected earnings of $4.17 per share, according to Thomson Reuters I/B/E/S.

Total revenue, including net interest income, rose 2 percent to $8.33 billion, helped by investment banking and lending business. Analysts expected revenue of $7.54 billion.

Investing and lending revenue rose 34.7 percent to $1.88 billion, while revenue from investment banking rose 16.9 percent to $1.80 billion. The lender's return on equity was 10.9 percent. Analysts typically like to see a bank produce returns of at least 10 percent to meet its cost of capital Goldman's arch rival Morgan Stanley MS.N reported a higher profit, driven by its investment banking and wealth management businesses.

Reporting by Aparajita Saxena, Sweta Singh in Bengaluru and Olivia Oran in New York; Editing by Bernard Orr