In the latest sign of a resurgence in Wall Street dealmaking, Goldman Sachs reported a 45% jump in profits driven by gains in key business lines, including M&A advisory and equity and debt underwriting.
The bank on Tuesday posted a profit of $2.99 billion for the three months that ended in September, up 45% from the same time last year. Revenue of $12.7 billion increased 7% over last year.
The results beat analysts' expectations and set the stage for Goldman's executives to discuss why Wall Street may be at the cusp of a surge in corporate dealmaking activity. They cited lower interest rates, a strong economy, and higher demand for corporate financing.
"We see significant pent-up demand from our clients," CEO David Solomon said in a call to discuss earnings. "The beginning of the rate-cut cycle has renewed optimism for a soft landing, which should spur increased economic activity."
Solomon said the M&A market still has a long way to go to reach historical 10-year averages. But he suggested there are reasons to be hopeful in a call that had one stock analyst asking about the potential for an "M&A supercycle." (Solomon didn't dismiss the idea, saying that 10-year averages could theoretically go up if much of the pent-up demand is released all at once.)
It's not just M&A that's seeing signs of a comeback. Lower rates could also boost demand for corporate lending, IPOs, stock issuance, and more.
Here are four key takeaways from the company's third-quarter earnings call.