Goldman Sachs Earnings More than Double As Profits Decline 23 Percent

Goldman Sachs reported earnings today of $2.11 billion for the first quarter, or $3.92 per common share compared with $1.56 per share for the first quarter of 2011 and $1.84 for the fourth quarter of 2011. Annualized return on equity was 12.2 percent for the first quarter of 2012.

The strong earnings numbers contrast with a 23 percent decline in profits at the nation's fifth largest bank, as measured by assets, which has cut 3,000 workers over the past year and trimmed back salaries and occupancy costs to lower total expenses by 14 percent.

Investment Banking and Institutional Client Services

The firm got its biggest boost from institutional client services. Their revenue jumped $2.7 billion from the fourth quarter to $5.7 billion. Revenue also rose significantly in its investing and lending business, jumping from $872 million in Q1 of 2011 to $1.9 billion in Q1 of this year.

Meanwhile, Goldman Sachs continued its leadership in investment banking, ranking first in worldwide announced mergers and acquisitions for the year-to-date even though revenues were 9 percent lower than the same period in 2011.

“We are pleased with the firm’s solid performance for the quarter,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “Stronger global markets, together with the firm’s deep and broad client franchise, drove improved results across most of our businesses. Because client activity remains relatively low in certain areas, especially in parts of Investment Banking, we believe that our mix of businesses gives the firm significant room for revenue growth as economic and market conditions continue to improve.”

Highlights

Net revenues in Investment Banking were 35 percent higher than the fourth quarter of 2011. Net revenues in Financial Advisory were $489 million, 37 percent higher than the first quarter of 2011. Net revenues in the firm’s Underwriting business were $665 million, 27 percent lower than the first quarter of 2011. Net revenues in equity underwriting were significantly lower than the first quarter of 2011, primarily reflecting a decline in industry-wide activity. Net revenues in debt underwriting were lower compared with a strong first quarter of 2011, primarily reflecting a decline in leveraged finance activity. The firm’s investment banking transaction backlog was essentially unchanged compared with the end of 2011. Net revenues in Institutional Client Services were $5.71 billion, 14 percent lower than the first quarter of 2011 and 87 percent higher than the fourth quarter of 2011.