Goldman Posts Strong Profit, But Share Offering Hits Stock

Goldman Sachs Group announced better-than-expected earnings of $3.39 a share, or $1.66 billion, for the first quarter, but the company's stock fell in after-hours trading on news of a $5 billion share offering.

Goldman Sachs' Headquarters

The securities giant, unexpectedly announcing results a day early, said the higher-than-expected profit was helped by strong trading revenue.

The New York-based bank also announced a $5 billion offering of common shares to the public. The proceeds, plus additional funds, will be used to repay the $10 billion of capital it received from the U.S. government under the Troubled Assets Relief Program. The money will be repaid pending the results of the government's "stress test" on the bank, Goldman said.

Goldman's shares were lower in after-hours trading as investors worried that the share offering would dilute per-share earnings. Click here to get an after-hours quote.

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The bank reported net income applicable to common shareholders for the quarter ended March 27 of $3.39 a share.

For the quarter ended Feb. 29, 2008, the company posted net income for common shareholders of $1.47 billion, or $3.23 a share. Analysts had on average expected earnings of $1.49 a share, according to Reuters Estimates.

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The company also declared a dividend of 35 cents. An earlier report had Goldman cutting its common dividend, but that report ended up being incorrect.

Last week, Wells Fargo stunned investors by announcing that first-quarter earnings would likely be $3 billion, far better than expected. The bank's announcement, which also came ahead of the planned earnings release, sparked a rally in stocks and encouraged some investors that the worst of the financial crisis might be over.

JPMorgan Chase is expected to post its first-quarter results on Thursday, while Friday features Citigroup and CNBC.com-parent General Electric , whose finance arm has been responsible for much of the company's recent profit woes.

While the news on financials lately has been mostly positive, there's some concern over whether the rally can last.

"What we're seeing right now is a time period where expectations are still pretty negatively biased," says Chris Armbruster, senior research analyst at Al Frank Asset Management in Laguna Beach, Calif. "I think a lot of people are skeptical of the rally, but if you're looking out a couple of years, right now we're sowing the seeds for a very healthy recovery."

Goldman, long considered one of the strongest banks on Wall Street, became a bank holding company last fall amid the mushrooming credit crisis. The firm also switched its reporting cycle so its fiscal quarters were in line with calendar quarters beginning Jan. 1.

To adjust its reporting schedule, Goldman began fiscal 2009 on Jan. 1 instead of Dec. 1 of last year. The bank said for the month of December, which fell between the change in reporting cycles, it lost $1 billion, or $2.15 per share.

Goldman's total revenue was $11.88 billion during the quarter, compared with $18.63 billion in the prior-year quarter. Analysts forecast revenue of $7.19 billion.

Goldman said profit was bolstered by strong revenue growth in its fixed income and currency businesses.

—Reuters and AP contributed to this report.

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