Goldman Sachs earns $1.74B, easily tops forecasts

By STEPHEN BERNARD, AP Business Writer

NEW YORK – Goldman Sachs Group Inc.’s earnings easily beat analysts’ forecasts again, but the bank saw a big slowdown in trading, its most profitable business.


Net income after paying preferred dividends fell 43 percent from the year-ago period as revenue in the bank’s bond, currency and commodities trading division fell sharply.


During a conference call with investors, Goldman’s chief financial officer David Viniar said customers worried about the broader economy cut back on trading during the quarter, which exacerbated a typical summer slowdown.


Goldman Sachs’ income fell to $1.74 billion, or $2.98 per share, the bank said Tuesday. It earned $3.03 billion, or $5.25 per share, during the same three-month period last year. Analysts polled by Thomson Reuters predicted earnings of $2.32 per share.


Revenue fell 28 percent to $8.9 billion, but still came in well ahead of the $7.92 billion analysts had forecast. Goldman’s shares jumped $4.29, or 2.8 percent, to $157.99 in morning trading, despite a broad decline in the stock market.


Analysts have been expecting Goldman’s earnings to decline because of slower trading, and have been slashing their estimates in recent weeks. A month ago, analysts’ average forecast was for income of $3.05 per share.


Goldman’s trading volume fell in the third quarter amid historically low interest rates and waning market volatility. Those low rates benefited Goldman’s investment banking division, however, which reported a 24 percent jump in revenue. With borrowing rates so low, many companies were eager to issue new debt.


The decline in Goldman’s overall revenue was also tied to a slowdown in stock trading and a weaker return on its investment in Industrial andCommercial Bank of China Ltd. Goldman’s stake in the Chinese bank generated just $9 million in revenue during the quarter, down from $344 million during the same quarter last year.


The New York-based bank continued to reduce compensation costs. The bank was strongly criticized during the financial crisis for doling out big paychecks even after it received government aid and while the broader economy suffered.


Goldman set aside $3.83 billion for compensation and benefits during the quarter. It has now set aside $13.12 billion for compensation during the first nine months of the year, a 21 percent drop from the same period last year.


Compensation totaled 43 percent of the company’s revenue for the year so far, down from 47 percent last year.


Source: Associated Press

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