Goldman posts
profit, beats
expectations

Bloomberg News

NEW YORK -- Goldman Sachs Group Inc. earned $756 million from operations in its fiscal fourth quarter, after losing money a year ago, led by gains in investment banking and a recovery from bond-trading losses last year.

The fifth-largest U.S. securities firm said profit from operations was $1.54 a share, compared to a loss of 2 cents a share, or $8 million, a year ago. That beat the $1.25-a-share average forecast of 13 analysts compiled by First Call Corp.

(Hawaii's Kamehameha Schools/Bishop Estate holds a minority stake in Goldman Sachs and participated in the company's initial public offering in May. Bishop Estate earned about $477 million by selling 9 million of its more than 30 million shares in the investment firm. The estate retains nearly 22 million shares, or 4.7 percent, of the company.)

Goldman shares, up about 53 percent this year, fell 94 cents to $80.94 in New York Stock Exchange trading on today's news. While earnings surged from a year ago, they fell or were little changed from the third quarter in some business segments, such as trading and merger advice.

"The third quarter was our second-best quarter ever in investment banking," said Chief Financial Officer David Viniar, making it difficult to improve performance from that period.

In bond trading, there was "a lot less activity given concerns about year 2000," he said of the fiscal fourth quarter, which ended Nov. 30.

Adding to investor concern, profit was enhanced by a decline in compensation costs to 44 percent of net revenue in the quarter, down from 50 percent in third quarter. Merchant banking, in which Goldman takes stakes in companies and sells them three to five years later, also boosted earnings with a record gain. Profits in that business vary widely from quarter to quarter.