Goldman Sachs reports better-than-expected earnings
Investment banking business continues to struggle, but expenses trimmed.
Shares of Goldman Sachs (GS) rose in early trading after the venerable Wall Street firm posted large quarterly earnings and revenue drops that nonetheless beat expectations. Many see reasons for optimism, especially since the company was able to trim operating expenses by 14% to $22.64 billion in 2011.
Net income in the three-month period ended Dec. 31, 2011 plunged 58% to $1.01 billion, or $1.84 a share, surpassing the $1.23 a share average estimate of 26 analysts surveyed by Bloomberg.
Revenue at the New York-based firm plunged 30% to $6.05 billion as the revenues from the company's big businesses, including investment banking and financial advisory, fell amid a slump in mergers and applications, equity debt underwriting and trading. Other Wall Street banks reported similar results.
"As economies and markets improve – and we see encouraging signs of this – Goldman Sachs is very well positioned to perform for our clients and our shareholders," said CEO Lloyd Bankfein in a press release.
Indeed, depressed stock values are expected to encourage more mergers and acquisitions. Moreover, there are early signs that the market for IPOs should be healthy. Goldman is expected to get a piece of the Facebook public offering, one of the most eagerly anticipated deals in the history of Wall Street.
Under Blankfein, Goldman has tightly controlled compensation expenses. They fell 21% to $12.22 billion in 2011 as the number of employees shrunk by 7%.
Goldman results prove that Wall Street's one-percenters may be down, but they are hardly out.
Jonathan Berr is a freelance business writer who owns no shares in the companies listed here.
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