Goldman Sachs crushes expectations on earnings and revenue

Goldman Sachs' Q3 surprise

Goldman Sachs on Tuesday reported third-quarter earnings that easily beat on the top and bottom lines, helped by strong gains in trading revenue. Shares spiked more than 1.5 percent in premarket trade.

The investment bank posted quarterly earnings of $4.88 a share on revenue of $8.17 billion, up from $6.86 billion in revenue in the quarter last year. Bottom-line profit surged 58 percent.

Analysts had expected Goldman Sachs to report third-quarter earnings per share of $3.82 on revenue of $7.42 billion, according to a consensus estimate from Thomson Reuters.

Like most of its big Wall Street peers, Goldman also reported a big rise in trading activity that exceeded what were already high expectations. Net revenue from fixed income, currency and commodities trading jumped 34 percent from the third quarter last year to $1.96 billion, while equities trading revenues rose 2 percent to $1.78 billion.

Stronger trading revenue also helped JPMorgan Chase, Citigroup and Bank of America report better-than-expected earnings for the third quarter.

Goldman posted return on equity of 11.2 percent, clearing the 10 percent bar for cost of capital.

"We saw solid performance across the franchise that helped counter typical seasonal weakness," Chairman and CEO Lloyd C. Blankfein said in the earnings release. "We continue to manage our balance sheet conservatively and are benefiting from the breadth of our offerings to clients."

The bank also ranked first in worldwide announced and completed mergers and acquisitions for the year, Goldman said in the release, citing Thomson Reuters.

"We are seeing the markets rebound in transaction levels, and that is positive for these money center banks," Vining Sparks analyst Marty Mosby said on CNBC's "Squawk Box."

Over the last three months, financials themselves are the second-best performers in the S&P 500. But the sector has struggled for during 2016 with moderate economic growth, lowered expectations for a Federal Reserve rate hike and one of the worst starts to a year for the U.S. stock market.