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.
“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.