Goldman Sachs reports strong quarter

Growth of nearly 50% in investment banking revenue contributed to the results.

By Bruce Kennedy Oct 16, 2012 11:43AM

arrow upIt was a strong third quarter for Goldman Sachs (GS).

 

In its earnings report Tuesday, the international investment bank announced net revenue of $8.35 billion, up from $3.59 billion a year ago and well above expectations. It also reported net earnings of $1.51 billion.


Goldman's adjusted third-quarter earnings of $2.85 per share beat estimates by quite a margin and were a considerable improvement over the loss of 84 cents per share the company posted in the same period in 2011.

 

"This quarter's performance was generally solid in the context of a still challenging economic environment," Goldman chairman and CEO Lloyd Blankfein said.

 

Investment banking revenue in the third quarter was $1.16 billion, up 49% over the third quarter of last year.

 

The company also increased its quarterly dividend to 50 cents from 46 cents per common share.


But the company remained guarded about the future. "Additional impact of economic uncertainty and weak investor conviction is the tendency for investors to transact in the most liquid and commoditized portion of the market," Goldman CFO David Viniar said during a conference call after the earnings were announced.


Viniar noted that while "client activity remains muted," there were some favorable economic developments in the third quarter, including increased monetary stimulus from the U.S. Federal Reserve and the European Central Bank's euro-bond bailout plans.


"While these positive developments have created some optimism in the marketplace, we as a management team remain focused on guiding the firm through a continued difficult operating environment," Viniar said. "We're serving our leading franchise, managing our risk profile prudently and being disciplined about capital usage and operating expenses."


Viniar is retiring in January and will be replaced by Harvey Schwartz, the co-head of Goldman's securities division. The company is also cutting its staff to make up for sales and trading revenue shortfalls.


Goldman is still struggling to recover from several large public relations gaffes. In August, the U.S. Justice Department said it wouldn't pursue criminal prosecution against the company on fraud charges relating to the start of the U.S. housing market crisis.


And in March, a top Goldman official made headlines when he resigned and published a New York Times editorial blasting Goldman's corporate culture as "toxic and destructive." In that editorial, Greg Smith said Goldman derided its clients as "Muppets" and put the company's well-being before its clients' best interests.


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