Goldman Blows Past Earnings On Record Debt Underwriting

Tickers in this article: C GS JPM
  • First-quarter EPS of $4.29 a share, beating the consensus estimate of an adjusted $3.86 a share, according to data compiled by Bloomberg
  • Excluding items, first-quarter net income was $2.26 billion, beating the consensus estimate of $1.97 billion.
  • Net revenue came in at $10.09 billion, surpassing an estimate of $9.65 billion.
  • Return on equity was 12.4%, Goldman's fourth-quarter ROE was 16.5%.

NEW YORK ( TheStreet) -- Goldman Sachs on Tuesday reported a surprise 10% rise in profits, as revenue at the bank exceeded $10 billion for the first time in two years.

Goldman's earnings were buoyed by sharp year-over-year revenue gains in the bank's debt and equity underwriting units, which drove overall investment banking revenue higher by 36% to $1.57 billion.

Analysts said the significant earnings beat also hinged on over $1 billion in private equity investment gains and continued tight management of the bank's expense.

Earnings at the nation's top standalone investment bank also reflected record quarterly debt underwriting revenue of $694 million, according to a company statement.

For the quarter, Goldman reported a profit of $2.26 billion, on revenue of $10.09 billion, beating adjusted estimates of $1.97 billion and $9.65 billion respectively.

Adjusted earnings per share of $4.29 surpassed an adjusted estimate of $3.86 a share, according to analyst forecasts compiled by Bloomberg.

Goldman Sachs shares fell less than 1% to $144.96 in early Tuesday trading.

"We think the market will largely ignore the investment gains but the strong investment banking fees and lower compensation ratio should be taken positively," Richard Staite, a banking analyst at Atlantic Equities, wrote in a note to clients.

Goldman's investment banking unit and investment management business posted particularly strong results relative to expectations, while equity trading revenue of $1.92 billion came in lower than some analyst estimates.

Investment banking revenue of $1.57 billion reflected a 36% year-over-year increase, while net revenue from the firm's Institutional Client Services unit, more generally known as trading, came in at $5.14 billion, dropping 10% from the first quarter of 2012.

Goldman's earnings indicated the firm's investment banking unit outperformed competitors JPMorgan and Citigroup, who reported revenue of $1.4 billion and $1.1 billion respectively, according to Staite's calculations.

The analyst, however, noted the 10% decline in Goldman's trading revenue was slightly worse than 5% declines posted by JPMorgan and Citigroup. Bank of America reports earnings on Wednesday.

Goldman's investment management unit posted $1.32 billion in revenue, reflecting a 12% rise from the first quarter of 2012. The unit posted $9 billion in client asset outflows, largely on money market assets and alternative investments, even as the firm saw a rise in equity and fixed income assets.

"Better than expected investment banking and investment management revenues roughly offset the revenue miss in trading," Brennan Hawken, a UBS analyst, wrote in a note to clients.