Goldman Sachs Group Inc. (GS), the fifth- biggest U.S. bank by assets, reported profit that exceeded analysts’ estimates as fixed-income trading rebounded and investments gained in value.

Third-quarter net income of $1.51 billion, or $2.85 per share, compared with a loss of $393 million, or 84 cents, a year earlier, the New York-based bank said today in a statement. The average estimate of 25 analysts surveyed by Bloomberg was $2.28 a share.

Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, 58, has been cutting costs to contend with lower revenue from trading securities, which accounts for more than half of the firm’s total. Low interest rates spurred a 66 percent jump in corporate-bond underwriting in the quarter, boosting investment-banking fees and debt trading at JPMorgan Chase & Co. and Citigroup Inc.

“All of those things that are positive for Wall Street firms have been doing well,” such as stock prices and bond trading, said Michael Vogelzang, chief investment officer at Boston Advisors LLC, which manages $2.3 billion including Goldman Sachs stock. “They have a lot of correlation with the market.”

Even after climbing 38 percent this year, Goldman Sachs’s stock is below the firm’s theoretical liquidation value as investors wait to see whether returns will remain depressed by slow economic growth and regulatory constraints. Return on equity, a measure of how well the firm reinvests stockholder funds, was 8.8 percent in the first half and 3.7 percent in the full year 2011, down from 22.5 percent in 2009.

In the third quarter, Wall Street’s biggest banks benefited from higher prices on stocks and bonds as central-bank efforts to spur economic growth fueled investor demand for riskier assets. The average yield premium that investors demand to hold corporate debt over risk-free government bonds dropped during the quarter to 168 basis points, or 1.68 percentage points, from 215 basis points, according to an index compiled by Bank of America Corp.’s Merrill Lynch.

(Source: Bloomberg)