Goldman profit beats estimates on investments, underwriting

Goldman Sachs (Source: Bloomberg) Goldman Sachs (Source: Bloomberg)

Goldman Sachs Group Inc., the fifth-biggest U.S. bank by assets, reported profit that beat analysts’ estimates on higher underwriting fees and a jump in the value of the firm’s own investments.

Third-quarter net income of $1.51 billion, or $2.85 per share, compared with a loss of $393 million, or 84 cents, a year earlier, the New York-based bank said today in a statement. The average estimate of 25 analysts surveyed by Bloomberg was $2.28 a share.

Goldman Sachs, led by Chief Executive Officer Lloyd C. Blankfein, 58, benefited from a rise in asset values that boosted the firm’s holdings of stock and debt, reversing a loss from a year earlier. Revenue from trading fixed-income, currency and commodities fell short of gains posted by JPMorgan Chase & Co. and Citigroup Inc.

“The main driver of the earnings beat was basically larger mark-to-market type gains in their investing and lending division,” said Richard Staite, an analyst at Atlantic Equities LLP in London who rates Goldman Sachs stock “neutral.” Trading revenue matched estimates, and “given that JPMorgan and Citigroup performed better than expected, that could be a bit disappointing,” Staite said.

Goldman Sachs raised the quarterly dividend to 50 cents from 46 cents, the second increase this year. The shares, which climbed 3.6 percent yesterday, advanced 0.3 percent to $124.87 in New York trading at 9:32 a.m. Even after gaining 38 percent this year, the stock is below the firm’s theoretical liquidation value as investors wait to see whether returns will remain depressed by slow economic growth and regulatory constraints.

‘Generally Solid’

“This quarter’s performance was generally solid in the context of a still challenging economic environment,” Blankfein said in the statement. “We continue to be disciplined in managing our operations and capital.”

Investing & Lending, the Goldman Sachs segment that includes the firm’s own holdings in stock, debt, private equity and funds, generated $1.8 billion of third-quarter revenue, compared with negative $2.48 billion a year earlier. The average estimate of six analysts surveyed by Bloomberg was for $1.19 billion.

The figure included a $99 million gain from the firm’s investment in Industrial & Commercial Bank of China Ltd., $824 million from other equities, $558 million from debt securities and loans, and $323 million of “other” revenue, mostly from Goldman Sachs’s stakes in funds.

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