New York - Third-quarter earnings at Goldman Sachs beat analysts’ estimates as costs fell more than revenue, the securities firm reported yesterday as it raised its dividend 10 percent.
Net income in the three months to September inched up to $1.52 billion (R15.1bn), or $2.88 a share, from $1.51bn a year earlier, the company said. That beat the $2.47 a share average estimate of 26 analysts.
Chief executive Lloyd Blankfein is lowering expenses to show investors his firm can deliver higher returns while it waits for a cyclical climb in trading and investment banking revenue that has not arrived. The stock has traded below 1.5 times book value for the past three-and-a-half years, the longest streak in its history.
“Goldman typically outperforms, and cost controls help for the time being,” analyst Keith Davis at Farr, Miller & Washington said before the results were posted. “We’re still optimistic, though the third quarter wasn’t a home run by any means.”
Goldman Sachs climbed 2.9 percent to $162.25 in New York on Wednesday, and has gained 27 percent this year after advancing 41 percent in 2012. The shares are still well below their pre-crisis peak of $247.92 on October 31, 2007.
JPMorgan Chase reported its first quarterly loss under chief executive Jamie Dimon last week as the firm took a $7.2bn charge to cover the cost of litigation and regulatory probes. On Tuesday Citigroup reported a $3.23bn profit that missed analysts’ estimates on a slump in bond-trading and mortgage revenue.
Banks have said clients had pulled back amid speculation the US Federal Reserve would slow its $85bn in monthly bond buying. Fed chairman Ben Bernanke said last month that the central bank had decided not to taper its stimulus yet.
This quarter’s trading activity on Wall Street has been marked by concern that Congress might fail to raise the debt ceiling and default on the US’s obligations. Blankfein led financial sector chief executives who met President Barack Obama earlier this month and said politicians should not use the threat of a debt default as a “cudgel”.
Legislators struck a deal late on Wednesday to end a stand-off that had shut down the federal government since October 1.
Part of Goldman Sachs’s fixed income trade comes from physical commodities trading, which faces a regulatory review. The Fed is examining all legal and regulatory exemptions that allow banks to participate in the commodities markets, according to a person briefed on the process.
Blankfein said last month that Goldman Sachs’s physical commodities unit was a “core” business that provided a crucial service to clients.
Its equities trading revenue, the highest in the world last year, may have been hampered by a programming error in August that caused the investment bank to send faulty stock options orders. – Bloomberg