Goldman Sachs Beats On Growth in Investment Banking

Goldman Sachs reported third-quarter earnings of $2.98 a share, better than analyst expectations as the Wall Street giant saw a big jump in net revenues on the strength of its investment banking division.

The Goldman Sachs booth on the floor of the New York Stock Exchange
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The Goldman Sachs booth on the floor of the New York Stock Exchange

Goldman shares wavered premarket as the company reported substantial drops in income from its trading, fixed income and equities businesses. The stock was last trading at $154.30, a slight gain from Monday's close.

Trading activity has been down across the board in the financial services industry, though Goldman's revenue fell less than analysts had feared.

The company reported net revenue of $8.9 billion—a decline of 27 percent—and net earnings of $1.90 billion. Investment banking saw a net revenue of $1.12 billion, a 22 percent gain from the previous quarter and 24 percent higher than a year ago.

Analysts had expected the firm to report earnings per share of $2.23 on revenue of $7.9 billion, according to Thomson Reuters data.

In the third quarter of 2009, Goldman earned $5.25 per share on $12.37 billion in revenues and 78 cents a share for the second quarter of 2010.

"Our third quarter results reflect solid performances across our businesses," Goldman CEO Lloyd C. Blankfein said.

The company reported a 36 percent drop in net revenues from trading and principal investments from the same period in 2009; a 37 percent drop in fixed income, currency and commodities; and a 33 percent slide in net revenue from equities.

Goldman was able to help its bottom line with a 20 percent year-over-year drop in operating expenses to $6.09 billion.

"Even though expectations were lower and even though the EPS numbers were reduced dramatically in the past couple of weeks, it's still a much more positive release than many of their competitors," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Counsel.

New York-based Goldman has found itself in the crosshairs of regulators this year, first defending against fraud charges from the U.S. Securities and Exchange Commission, and then preparing to reshape trading businesses to comply with the financial regulation reform bill.

Goldman, which has faced a backlash over its pay practices, set aside $3.83 billion for compensation in the third quarter, bringing its total pool to $13.12 billion for the year, down 21 percent from a year ago.

—Reuters contributed to this report.