Goldman Sachs Group Inc posted much higher-than-expected Q1 profit as it took more trading risk, and said it plans a $5 billion common share sale to help pay back government funds.
The bank also said it lost $1 billion in December 2008, mainly due to trading and investment losses. That month was reported separately and for the first time on Monday as Goldman and Morgan Stanley have both changed their financial years to match calendar years.
Goldman also disclosed that it has set aside $168,901 per employee on average for compensation in the quarter, almost 35% more than in the first quarter of the previous fiscal year. The figure is likely to raise eyebrows given concerns expressed by lawmakers and others about excessive compensation on Wall Street.
The results, which were announced a day ahead of schedule, were seen by many analysts as evidence of Goldman’s ability to sidestep the worst of the financial crisis. It has posted just one quarterly loss since the middle of 2007, even as competitors have posted several quarterly losses, or gone out of business.
For the quarter ended March 27, Goldman reported net income for common shareholders of $1.66 billion, or $3.39 a share, far exceeding analysts’ average forecast of $1.49 a share, according to Reuters Estimates. Revenue rose 13% to $9.43 billion.
Some analysts said the results, following Wells Fargo & Co’s surprising announcement last Thursday that it expects to report a record Q1 profit, were a sign the US banking industry is stabilizing.
“It’s another sign that the financial sector has gone through the worst,” said Keith Wirtz, president and chief investment officer at Fifth Third Asset Management.
Goldman’s profit came in part because of strong trading results in fixed income, currencies and commodities, where the company posted $6.56 billion of revenue.
The earnings do not compare directly with Goldman’s Q1 last year, which ended on Feb. 29, 2008, but in last year’s quarter the bank posted net income for common shareholders of $1.47 billion, or $3.23 a share.
Multiple US banks have said that low interest rates and rebounding markets helped them post stronger results in the first two months of the quarter. But JPMorgan Chase CEO Jamie Dimon has said that March was more difficult. Goldman’s shares fell 1.8% in after-market trading on Monday.
Its shares had risen 4.7% to $130.15 during the main trading session and the bank is one of the few whose shares trade above their accounting value, or book value. Goldman’s is $98.82 per share.
Goldman’s share price has more than doubled since hitting a record low in November. It is up more than 50% this year. (Reuters)