MW: Goldman profit jumps, sees conditions improving
NEW YORK (MarketWatch) -- Goldman Sachs Group said Thursday that its third-quarter profit nearly quadrupled from year-ago levels amid strong performance across the company's business units and noted that economic conditions are improving.
The investment bank (GS 187.67, -4.61, -2.40%) , which continued to benefit handsomely from the recovery of credit markets and the retreat of rivals like Lehman Brothers, said its third-quarter profit rose to $3.19 billion, or $5.25 a share, from $845 million, or $1.81 a share, in the year-ago period.
Analysts polled by Thomson Reuters had expected the firm to earn $4.24 a share.
Third-quarter net revenue rose to $12.37 billion, from $6.04 billion a year ago.
Goldman switched to a calendar-year reporting schedule from a fiscal-year schedule last year, and the year-ago data are for the period ended Aug. 29, 2008.
Goldman shares fell 3% in pre-market trading Thursday.
"Although the world continues to face serious economic challenges, we are seeing improving conditions and evidence of stabilization, even growth, across a number of sectors," said Lloyd Blankfein, Goldman's chairman and chief executive officer, in a press release.
Goldman's fixed income, currency and commodities business generated net revenue of $5.99 billion in the third quarter.
As the financial system has recovered from near-collapse, Goldman has emerged as the leading Wall Street trading firm. With Lehman (LEHMQ 0.16, +0.00, +1.86%) gone and other rivals like Bear Stearns and Merrill Lynch swallowed by large commercial banks, Goldman has grabbed a larger share of lucrative markets such as institutional fixed-income trading.
The combination of zero interest rates in the U.S. and little inflation so far has encouraged institutional investors to exit cautious cash positions and buy riskier fixed-income securities like junk bonds. Institutional trading is usually slow in the third quarter, but this year, activity didn't fall as much as investors continued to take on more risk.
Goldman has taken advantage of this trend by making markets for institutional fixed-income investors and by trading in the markets with its own money.
Shares of Goldman have surged more than 125% so far this year, while rival Morgan Stanley (MS 32.27, -0.56, -1.71%) is up roughly 105% and J.P. Morgan Chase (JPM 46.46, -0.70, -1.48%) has gained about 50%.
