Goldman Sachs’ Profit Falls but Beats Estimates
Goldman Sachs Group Inc. on Tuesday reported quarterly earnings that exceeded analysts’ estimates for the third consecutive quarter, as robust investment banking performance helped offset a summer trading slump.
The results drove the company’s shares up $7.29, or 4.8%, to $158.29, their biggest gain since March, amid a broad market rally.
Although profit in the three months ended Aug. 25 fell 1.4% from a year earlier, to $1.59 billion, or $3.26 a share, the company beat the average estimate of $2.97 a share in an analyst survey by Thomson Financial.
The firm said profit would have been $1.68 billion had it not had to record $133 million of noncash expenses for stock grants under new accounting rules.
Goldman’s third-quarter revenue rose 2% to $7.46 billion.
Projections for most Wall Street investment banks were lowered several times during the quarter, partly because of weakness in stock trading as share prices struggled and many investors pulled away.
But Goldman’s investment banking revenue was better than many on Wall Street had expected, rising 27% to $1.29 billion from a year earlier. Goldman, which is the top merger advisor among its Wall Street rivals, attributed the gain to strong equity and debt underwriting.
Fees derived from merger advisory increased 9%.
David Viniar, Goldman’s chief financial officer, said many of the firm’s corporate clients were optimistic about pursuing deals in the fourth quarter. He said that the backlog of pending deals was strong and that he didn’t see any real sign of a slowdown.
“The level of dialogue on transactions is still quite high, the corporate activity level is quite high, and people are interested in doing deals,” he said.
Goldman has been led since June by Chief Executive Lloyd Blankfein, after former CEO Henry M. Paulson Jr. left the post to become U.S. Treasury secretary.
The company said it bought back 3.8 million of its shares last quarter, and its board Monday authorized the repurchase of an additional 60 million shares. The company said that, combined with a previously authorized buyback, it could repurchase about 15% of outstanding fully diluted shares.
