(Reuters) - Goldman Sachs earned its biggest quarterly profit in more than three years, beating Wall Street expectations, as its investment bankers brought in more fees from deals and debt sales, while its traders benefited from a surge in market activity.

The investment bank's shares rose 5% in early trading on Wednesday as profit climbed to $4.11 billion, or $11.95 per diluted share, for the fourth quarter ended Dec. 31, compared with $2.01 billion, or $5.48 per diluted share, a year ago, Goldman said.

Its EPS beat the $8.22 expected by analysts, according to estimates compiled by LSEG.

Banking industry executives anticipate stronger dealmaking activity this year as the U.S. Federal Reserve cuts interest rates and President-elect Donald Trump's pro-business comments fuel optimism among investors.

"We are very pleased with our strong results for the quarter and the year," CEO David Solomon said in a statement. "I'm encouraged that we have met or exceeded almost all of the targets we set in our strategy to grow the firm five years ago."

Goldman's investment-banking fees rose 24% to $2.05 billion in the fourth quarter, powered by debt underwriting that benefited from strong leveraged finance and corporate bond sales.

An industry-wide recovery in mergers and acquisitions along with renewed activity in equity and debt markets lifted results in the second half of 2024 for Wall Street's top banks.

"We have been bullish on GS stock because we think the market is not fully incorporating the upside potential of a strong M&A cycle," said Chris Kotowski, banking analyst at Oppenheimer & Co., in a note.

Within investment banking, equity and debt underwriting revenue jumped 98% and 51%, respectively, in the fourth quarter, helped by secondary and initial public offerings, private placements and leveraged finance activity.

Goldman Sachs' advisory revenue declined by 4% for the quarter, but rose for 2024, owing to a rise in completed deals, the bank said.

Total investment-banking revenue globally increased 26% to $86.8 billion in 2024, with North America surging 33% from a year ago, according to data from Dealogic. Goldman earned the second-highest revenue across banks globally.

BRISK DEALMAKING

Last month, Solomon said at a Reuters conference that dealmaking in equities and mergers and acquisitions could exceed 10-year averages in 2025.

Revenue in Goldman's asset and wealth management arm climbed 8% to $4.72 billion, while revenue at its global banking and markets division increased by 33% to $8.48 billion in the fourth quarter.

Equity traders at the bank continued to ride a broader stock market rally in the final three months of 2024, with revenue surging 32% to $3.45 billion. It posted a record net annual revenue in equities.

Stocks in the U.S. have blown through record highs, fueled by optimism about the new administration's economic policies, combined with lower interest rates.

Fixed income, currency and commodities trading also shined with a 35% jump in revenue.

Goldman announced a raft of leadership changes on Monday as it created a new division to focus on financing large deals and providing loans to corporate clients, looking to capitalize on the lucrative private credit market.

Meanwhile, the bank is still slimming down its ill-fated consumer operations after losing billions of dollars. Solomon, who once championed the retail push, has drawn criticism for the strategy.

Goldman's provisions for credit losses stood at $351 million for the fourth quarter, down from $577 million a year ago, mainly due to potential losses in its credit-card portfolio.

Revenue for platform solutions, the unit that houses some of Goldman's consumer operations, climbed 16% to $669 million.

Goldman shares ended 2024 with a 48.4% surge, the biggest rise among the six biggest U.S. lenders, and handily surpassed the market benchmark.

Rival JPMorgan Chase posted record annual profit, while Wells Fargo's profit also climbed due to a rebound in dealmaking activity.

For 2024, Goldman earned a profit of $40.54 per share versus $22.87 a year earlier. The bank's overall revenue rose 16% to $53.51 billion.

It ended 2024 with a global workforce of 46,500, up 3% from a year ago. Compensation and benefits rose 4% in the fourth-quarter from a year earlier.