GOLDMAN SACHS has posted a 23 per cent drop in first-quarter net earnings, but has managed to beat analysts' expectations after a rebound in trading and credit markets helped push up some of its revenues.
Goldman reported earnings of $3.92 a share, higher than the $3.55 a share expected by analysts.Demand for bond trading and debt underwriting, as well as derivatives used for hedging, helped to offset declines in other core areas of the New York-based bank's business in the first three months of 2012. The bank's board also agreed to increase Goldman's quarterly dividend from 35 US cents to 46 cents.
"Stronger global markets, together with the firm's deep and broad client franchise, drove improved results across most of our businesses," said chief executive Lloyd Blankfein.
"Because client activity remains relatively low in certain areas, especially in parts of investment banking, we believe that our mix of businesses gives the firm significant room for revenue growth."
The first quarter of last year was one of the best money-making periods for fixed income for the world's investment banks, making it difficult to outperform.
Net income in the first quarter of 2012 fell to $2.11 billion compared with the $2.74 billion earned in the same period last year, but more than doubled compared with the turbulent fourth quarter, when markets were roiled by the euro zone debt crisis.
Goldman results follow similar first-quarter performances from JPMorgan Chase, Citigroup and Wells Fargo. However, Citi and JPMorgan - which have similar fixed income, currencies and commodities operations to those of Goldman - reported a more moderate slump in revenues in those areas.
Goldman also still faces looming difficulties. The bank is expected to be hit hard by new regulation, such as the Volcker rule which prevents banks from trading for their own book, as well as new Basel III regulations that will force it to hold more capital against parts of its balance sheet.
Goldman reduced the amount of compensation paid to its bankers by 16 per cent to $4.38 billion in the first quarter. - Copyright The Financial Times Limited 2012
