Goldman Sachs Group Inc., the world’s most profitable securities firm before the financial crisis, reported earnings that topped analysts’ estimates on a 63-percent gain in revenue from underwriting stocks and bonds.
First-quarter net income rose 7 percent to $2.26 billion, or $4.29 a share, from $2.11 billion, or $3.92, a year earlier, the New York-based company said today in a statement. That was higher than all 24 analysts’ estimates in a Bloomberg survey.
Record debt-underwriting revenue and cost cuts helped Chief Executive Officer Lloyd C. Blankfein increase return on equity to 12.4 percent from 12.2 percent a year earlier. Blankfein, 58, has sought to boost returns by cutting $1.9 billion in expenses and benefiting as trading volume increases and some competitors exit business lines.
“The key positive is strong investment-banking fees,” said Richard Staite, an analyst at Atlantic Equities LLP in London, who has a neutral rating on Goldman Sachs stock. “Ultimately revenues remain as the key share-price driver.”
Goldman Sachs gained 0.5 percent to $147.16 in New York trading at 9:32 a.m.. The stock gained 15 percent this year through yesterday after advancing 41 percent in 2012. The shares reached $193.60 on Oct. 14, 2009.
Revenue rose 1 percent to $10.1 billion. Compensation, the firm’s biggest expense, fell 1 percent to $4.34 billion and amounted to 43 percent of revenue for the quarter, down from 44 percent a year earlier. The ratio was 38 percent for all of 2012.
Compensation Ratio
“Their comp ratio at 43 percent is always good,” said Brad Hintz, an analyst at Sanford C. Bernstein & Co. who rates Goldman Sachs shares outperform. “We think Goldman is trying to boost the performance of trading by repricing their trading operations,” Hintz said, adding that he expects the full-year figure to be below last year’s ratio.
First-quarter revenue from investment banking, the business run globally by Richard J. Gnodde, David M. Solomon and John S. Weinberg, climbed 36 percent to $1.57 billion. That topped JPMorgan Chase & Co.’s $1.43 billion in investment-banking revenue for the first time in more than five years.
The figure included $484 million of financial-advisory revenue, including fees for takeover advice, a drop of 1 percent. Revenue from underwriting, a business led by Stephen M. Scherr, climbed to $1.08 billion in the first quarter, including $694 million from debt underwriting and $390 million for equity offerings.