Goldman Sachs posts forecast-busting earnings

Monday, April 13, 2009 at 10:37 PM Posted by Beijing News


US banking giant Goldman Sachs took markets by surprise, announcing forecast-busting quarterly earnings and a massive five-billion-dollar share issue to help repay government aid.

Goldman Sachs reported first-quarter net profit of 1.81 billion dollars with earnings per share of 3.39 dollars, sharply higher than 1.33 dollars per share forecast by most analysts.

The profit came on the back of revenues of 9.43 billion dollars in the first quarter, which ended on March 27.

Goldman, which reported its earnings just after the stock market close, kicked off the highly anticipated financial sector's earnings season early. It had previously scheduled its results before the stock market open Tuesday.

Investors have been on tenterhooks awaiting the latest results from financial firms reeling from the global financial and economic crisis.

US stocks staged a powerful rally Thursday, capping a fifth weekly gain, after leading bank Wells Fargo forecast a "record" three-billion-dollar profit in the first quarter, sparking hopes of a recovery in the sector.

The markets were closed Friday for the Easter holiday and speculation swirled that Wells Fargo's rosy outlook did not necessarily augur "green shoots" of a turnaround.

Goldman Sachs' earnings signaled the much-hoped for rebound may be at hand, analysts said.

"Goldman Sachs hits the cover off the ball," analysts at 24/7said.

"Maybe the recovery of the major banks and investment houses is not a mirage. Maybe it is the real deal," 24/7's Douglas McIntyre said.

For the 2008 fourth quarter that ended November 28, Goldman posted a net loss of 2.12 billion dollars.

"Given the difficult market conditions, we are pleased with this quarter's performance," Lloyd Blankfein, Goldman's chairman and chief executive, said in the statement.

"Our results reflect the strength and diversity of our client franchise, the resilience of our business model and the dedication and focus of our people."

In a separate statement after the market close, the bank announced it would put five billion dollars in common stock on the market to help it raise cash to repay a government rescue of 10 billion dollars.

Goldman, one of the major US banks undergoing "stress tests" by federal authorities to determine their viability, said it hoped the capital raised would allow it to repay all of the public money injected through the Treasury's Troubled Asset Relief Program.

"After the completion of the stress assessment, if permitted by our supervisors and if supported by the results of the stress assessment, Goldman Sachs would like to use the capital raised plus additional resources to redeem all of the TARP capital," the company said.

Goldman and some other financial firms have indicated in recent weeks that they want to quickly pay back the federal funds because of the government conditions affecting their management.

JPMorgan Chase and Citigroup, other blue-chip members of the Dow Jones Industrial Average, are to report their earnings on Thursday and Friday, respectively.





A boy rides his bike at sunset in a park in Bucharest, Romania.AP Photo/Vadim Ghirda

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