Goldman Blows Out Earnings On Trading, Banking Growth

Tickers in this article: GS JPM MS
  • Goldman Sachs reports fourth-quarter profit of $5.60 a share, beating the consensus estimate of an adjusted $3.66 a share, according to data compiled by Bloomberg
  • Excluding items, net income was $2.89 billion, beating an estimate of $1.78 billion.
  • Net revenue came in at $9.24 billion, beating an estimate of $7.83 billion.
  • Annual profits came in at $7.48 billion or $14.13 a share
  • Full year return on equity was 10.7%, beating some estimates. Fourth quarter ROE was 16.5%.
  • The bank bought back $1.53 billion in shares, beating an estimate of $1.2 billion in buybacks
  • Compensation as a percentage of revenue fell to 37.9%, beating an estimate of roughly 40%

NEW YORK (TheStreet) -- Goldman Sachs(GS) reported better than expected earnings of $2.89 billion, on revenue of $9.24 billion, beating adjusted estimates of $1.78 billion and $7.83 billion respectively.

Adjusted earnings per share of $5.60 beat an adjusted estimate of $3.66 a share, according to analyst forecasts compiled by Bloomberg. Earnings of the nation's top standalone investment bank were far better than expected, with top line revenue and profitability and bottom line expense coming in better than expected.

Revenue across Goldman's businesses grew year-over-year, surpassing expectations of double digit declines. The bank's individual investment banking, equities trading and fixed income currency and commodity trading units all beat estimates.

Meanwhile, return on equity, the percentage Goldman earns by reinvesting its retained earnings, came in at 10.7 %, beating a full year estimate of just over 9%. For the fourth quarter ROE was 16.5%, beating an estimate of 10.3%.

Prior to earnings, Bernstein Research analyst Brad Hintz forecast $2.3 billion in net institutional equities revenue, $1.7 billion in net fixed income currency and commodity trading revenue and $1.2 billion in net investment banking revenue, in line with Goldman Sachs's previous guidance.

Those earnings were colored by a $125 million drain on accounting adjustments tied to Goldman's credit spreads and a $500 million gain on the bank's former hedge fund servicing unit.

Morgan Stanley analyst Betsy Graseck said in a January research note Goldman might announce a total share buyback authorization of $1.2 billion or 9.2 million shares. The analyst forecast compensation expense to end the year at just over 40% of overall revenue.

For more on Goldman Sachs see why the company's bottom line will be its key earnings driver in 2013.

-- Written by Antoine Gara in New York