A surge in stock sales and mergers made for the best third quarter ever for investment bankers.

Companies sold about $117 billion of stock and completed $655 billion of takeovers, helping produce investment-banking revenue of $3 billion for Goldman Sachs, Morgan Stanley, Lehman Brothers, and Bear Stearns in the latest fiscal quarter, data compiled by Bloomberg show.

“We’re awfully close to a record year if you measure it by the fee pool,” the joint global head of investment banking at Zurich-based UBS, Ken Moelis, said. “There’s been a really positive change in the outlook for investment banking.”

Companies are raising the most cash through equity offerings since 2000, with stock markets at four-year highs.

Interest rates are less than half the levels of 15 years ago, sparking the biggest leveraged buyouts since the 1980s.

Even record investment banking revenue was a sidelight for Wall Street, generating just 15% of the combined third-quarter revenue reported by Goldman, Morgan Stanley, Lehman, and Bear Stearns, reports by the companies show. Trading stocks, bonds, commodities, and currencies made up 56%.

The increase in investment banking and trading revenue that propelled profits to all-time highs at Goldman and Lehman may be an optimistic sign for New York-based rivals including Citigroup and Merrill Lynch, which report their latest financial results this month.

“We expect to see significant corporate-finance activity between now and next year,” said Merrill Lynch’s Guy Moszkowski, the top-ranked brokerage analyst in Institutional Investor’s latest survey of money managers. “Right now, it’s looking awfully good for Wall Street.”

The value of takeovers completed in the past three months rose 41% from a year earlier to the highest level since the first quarter of 2001, Bloomberg data show. Companies announced about $585 billion of mergers and acquisitions, a drop from $693 billion in the second quarter.

Europe accounted for a larger proportion of announced deals than America for the first time since the end of 2004.The biggest was Gas Natural SDG SA’s $26.5 billion hostile bid for Endesa SA in Spain.

The energy, financial services, telecommunications, publishing, and broadcast industries are ripe for consolidation in Europe, the head of global M &A at Citigroup, Frank Yeary, said.

Rising stock prices have given chief executives in the region confidence to grow through mergers, he said. Benchmark indexes in Europe were up 6% to 10% in the quarter.

“There’s a lot of momentum in Europe,” Mr. Yeary said. “Over the past few years, Europe has become nearly as large a contributor to overall merger activity as the U.S.”

Boots Group, owner of the largest drugstore chain in Britain, agreed yesterday to merge with Alliance Unichem to create a healthcare group with about 2,600 pharmacies across Europe. Goldman is Boots’s adviser, and Merrill Lynch and Credit Suisse First Boston are working with Alliance Unichem.

In another deal, NTL, Britain’s biggest cable operator, unveiled a plan yesterday to buy smaller rival Telewest Global for about $6 billion. Goldman is NTL’s adviser. Deutsche Bank and N.M. Rothschild & Sons are working with Telewest.

In America, R.H. Donnelley Corp. agreed yesterday to buy Dex Media for $4.2 billion to become the country’s no. 3 directory publisher.

Goldman ranked as the world’s no. 1 merger adviser in the third quarter, followed by New York-based JPMorgan Chase & Company and Citigroup, Bloomberg data show. UBS was fourth.

Buyout firms including Kohlberg Kravis Roberts & Company and the Blackstone Group are making 2005 an unprecedented year for leveraged buyouts. LBO specialists, which borrow about two-thirds of the purchase price to finance acquisitions, announced $50 billion of takeovers in the past three months, bringing the full-year amount to a record $173 billion, Bloomberg data show. The second-biggest LBO in history was disclosed last month – Carlyle Group, Clayton Dubilier & Rice, and Merrill Lynch’s $15 billion acquisition of Hertz from Ford Motor.

Higher profits likely will mean bigger bonuses. Investment bankers will probably see compensation climb as much as 20% and pay increases will be among the biggest on Wall Street, the president of compensation consultant Johnson Associates, Alan Johnson, said.