Investment banking boosts Goldman Sachs
By Steve Rothwell, AP
January 18, 2013, 12:23 am TWN
NEW YORK--Goldman Sachs went some way to restoring its reputation as a Wall Street powerhouse after its earnings almost tripled in the fourth quarter, handily beating analysts' estimates, as investment banking revenues surged.
The investment bank earned US$2.83 billion after paying preferred dividends, compared with US$978 million a year earlier in the period ending Dec. 31, 2012.
The bank's debt underwriting business profited from a rally in bonds and a surge in demand for debt securities. Goldman's debt underwriting business earned US$1.96 billion in revenues for the year, its second-best annual performance and the highest since 2007. An increase in stock underwriting also helped boost revenues.
"The fourth quarter reminds us a little of the old days and should give investors confidence in Goldman's future earnings power," Glenn Schorr, an analyst at Nomura, wrote in note to clients.
Goldman's stock jumped US$5.50 to US$141.09, its biggest one-day advance in ten months. The bank's stock has returned 45 percent in the past 12 months.
Analysts were encouraged that revenue growth of 53 percent for the year outpaced a small increase in employee compensation, helping the bank boost its profit margins. Paying employees is Goldman's biggest single cost, accounting for more than half of its total operating expenses.