Goldman 1Q earnings surpass Wall Street estimates
At Goldman Sachs Group Inc., the U.S. Treasury became one stakeholder too many.
The Wall Street giant late Monday confirmed rumors that had been bubbling in recent days: It plans to raise $5 billion in new capital via a stock offering and use those proceeds and other funds to repay the $10 billion the company got last fall as part of the Treasury’s financial-system rescue.
That could make Goldman the first major bank to repay the bailout money -- and thus the first to get out from under the government’s restrictions on executive compensation and dividend payments, among other things.
Exiting TARP -- the Troubled Asset Relief Program -- won’t be as simple as writing a check, however. Goldman must pass the “stress test” that regulators now are conducting at major banks to ensure that they have the capital to survive a worsening economy.
“After the completion of the stress assessment, if permitted by our supervisors and if supported by the results of the stress assessment, Goldman would like to use the capital raised plus additional resources to redeem all of the TARP capital,” the company said in a statement Monday.
Goldman Chairman Lloyd Blankfein had made clear in recent weeks that he wanted out of the government partnership necessitated by the Treasury’s TARP investment.
Blankfein couched that desire in terms of what would be best for taxpayers, not just what would be best for Goldman and its legendary franchise.
He said last week that banks had “not a choice, but an obligation to taxpayers” to repay the government as soon as possible.
It will help that Goldman on Monday reported much-better-than-expected earnings for the first quarter ended March 27, reinforcing investors’ faith that the company will remain Wall Street’s premier money machine.
“Goldman is making some progress in the quest to restore its pre-crisis image of exceptionalism,” said Isabel Schauerte, an analyst at Boston-based financial research firm Celent. “Better-than-expected earnings are obligatory in this regard, as is early repayment of TARP money.”
Goldman said profit was $1.66 billion, or $3.39 a share, compared with $1.47 billion, or $3.23 a share, a year earlier. Analysts had expected the firm to earn about $1.60 a share.
It appears that Goldman benefited from investors’ hunger for bonds in the first quarter as stock markets worldwide sank for most of the period.
The company said revenue in its unit that trades and invests in bonds, currencies and commodities soared to a record $6.56 billion, more than double the $3.14 billion of a year earlier.
By contrast, Goldman reported lower revenue year-over-year in every other division, including stock trading, investment banking and asset management.
Goldman shares were down modestly in after-hours trading, after the earnings report and stock-sale announcement. The price eased to $127.85 after rising $5.82 to a six-month high of $130.15 in regular trading.
Some profit-taking wouldn’t be a surprise, given the stock’s recent performance: It’s up 54% this year, while the average financial stock in the Standard & Poor’s 500 index still is down 11% even after almost doubling since March 6.
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