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Goldman Sachs' (GS) strategy to focus on the businesses that it's traditionally best known for -- namely, investment banking and institutional trading -- paid big dividends in 3Q24 as the company cruised past EPS and revenue estimates. It's been a bumpy ride for GS as the company sheds its consumer-centric assets, including divesting GreenSky last year and exiting its credit card partnership with General Motors (GM) last month, but the Federal Reserve's interest rate cut and the prospect for lower rates ahead has provided a spark for the M&A and new issue markets.

• This is reflected in the strong performance of GS's Global Banking & Markets segment, which generated net revenue growth of 7% to $8.55 bln. According to GS, the company held the #1 position in both M&A and common stock offerings during the quarter. On that note, Advisory revenue increased by 5% yr/yr to $875 mln, while a more active IPO market helped drive a 25% yr/yr jump in equity underwriting fees to $385 mln.
• Overall, investment banking revenue grew by 20% to $1.87 bln, with debt underwriting in particular standing out as revenue surged by 46% to $605 mln. The robust growth here was fueled by increases in leveraged finance and investment-grade activity.
• The news on the trading side is more mixed, but that didn't come as a surprise. On September 10, CEO David Solomon stated at the Barclays Global Financial Services Conference that trading revenue was tracking towards a 10% decline, mainly due to weaker conditions in FICC. Although FICC trading was indeed a weak spot with revenue down by 12% due to significantly lower net revenues in interest rate products and commodities, overall trading revenue was actually higher by nearly 2% on a yr/yr basis.
• Offsetting the FICC weakness was an 25% increase in equity trading revenue to $385 mln, reflecting strength in both derivatives and cash products.
• Lastly, GS's Asset & Wealth Management segment also stood out as net revenues grew by 16% to $3.75 bln. Assets Under Supervision (AUS) climbed to a record level of $3.10 trillion, leading to record management and other fees of $2.62 bln.

The main takeaway is that business is quite healthy for GS, but expectations were running high ahead of the earnings report, as illustrated by the stock's 7% rally since the beginning of October, which took shares to all-time highs. The company's better-than-expected results also bode well for rival Morgan Stanley (MS), which is scheduled to issue its Q3 results before the open tomorrow morning.