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Goldman Sachs beats 1Q expectations

By JOE BEL BRUNO, AP Business Writer
Tue Mar 18, 12:27 PM ET



NEW YORK - Goldman Sachs Group Inc., the world's largest investment bank, on Tuesday reported stronger asset management and commodities performance pushed first-quarter results well above Wall Street projections.



However, the investment house also showed its vulnerability to the global credit crisis. Goldman posted net losses on residential mortgages and securities of $1 billion, credit products produced another $1 billion loss, and investment banking returns were sluggish.

"Market conditions are clearly very difficult," Chairman and Chief Executive Lloyd Blankfein said in a statement.

Goldman reported first-quarter earnings of $1.47 billion after preferred dividends, or $3.23 per share, down from $3.2 billion, or $6.67 per share, last year. Revenue fell to $8.33 billion from $12.73 billion a year earlier.

Analysts polled by Thomson Financial on average expected earnings of $2.58 per share on $7.47 billion in revenue. Reflecting the uncertain nature of the times, the 18 analysts reporting earnings estimates had forecast anything from $1.95 to $3.40 per share in profits.

Liquidity problems among investment banks have been a major question in recent days. Lehman's competitor Bear Stearns Cos. was forced to sell itself Sunday for about $2 per share in order to avoid bankruptcy. The sale came just days after its liquidity evaporated in a matter of hours, as investors and lenders worried over the company's investments in risky debt.

As mortgages increasingly defaulted in 2007, investors shied away from bonds backed by the risky loans for fear of the bonds defaulting. That lack of investor appetite led banks to cut the value of their holdings, and has severely reduced investment banks' capital markets and fixed income business.

Goldman was still able to surpass expectations, a major relief to analysts and investors who remained worried that the market's upheaval in the past month might have severely curtailed the investment bank's ability to make money.

One area that did not fare well was its principal trading — usually a strong suit for Goldman. Revenue fell to $5.12 billion, down by about half from the year-ago period.

However, fixed-income trading was down only slightly during the quarter, despite losses from its mortgage loans and securities.

investment banking revenue fell to $1.17 billion, down by a third as the number of deals during the period began to diminish. Companies are much more reticent to complete big deals given the market's fluctuations.

Shares of the company rose $20.92, or 13.9 percent, to $171.93 in midday trading.

http://news.yahoo.com/s/ap/20080318/ap_on_bi_ge/earns_goldman_sachs;_ylt=AnTrF_KVsyNtWVQQ.vGyC2Bv24cA