Goldman profit beats analysts' estimates on investments

, Bloomberg

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Lloyd C. Blankfein

Goldman Sachs Group Inc., the fifth-biggest U.S. bank by assets, said quarterly profit almost tripled as gains in the value of the firm's own investments contributed to the first year of revenue growth since 2009.

Fourth-quarter net income surged to $2.89 billion from $1.01 billion a year earlier, according to a statement Wednesday from the New York-based firm. Earnings for common shareholders, which include the cost of preferred stock dividends, rose to $2.83 billion, or $5.60 a share, from $978 million, or $1.84. The average estimate of 26 analysts surveyed by Bloomberg was for $3.66 a share, with predictions ranging from $2.56 to $4.80.

Chief executive officer Lloyd C. Blankfein, 58, has undertaken a $1.9 billion expense-reduction effort since mid-2011 and said he expected earnings growth to resume when the economy and markets improved. A stock-market rebound and a $500 million profit from selling a hedge fund-administration unit helped revenue recover from the lowest first half since 2005.

"The big question is how do they continue to transition away from being a trading business to other ways of making money," Benjamin B. Wallace, an analyst at Westborough, Massachusetts-based Grimes & Co., which oversees $1.1 billion, said before results were released. "How much of their own capital are they going to continue to be investing going forward?"

Stock Rises

JPMorgan Chase & Co. , the biggest U.S. bank by assets, reported earlier Wednesday that 2012 was its third straight year of record profit. Bank of America Corp., the second-largest lender, and No. 3 Citigroup Inc. are set to release results tomorrow. Morgan Stanley, the sixth-biggest bank, is due on Jan. 18.

Goldman Sachs gained 6.3 percent this year through Tuesday after advancing 41 percent in 2012. The company raised its dividend twice last year, increasing the quarterly payout to 50 cents a share from 35 cents.

Return on average common stockholders' equity, a measure of how well the firm reinvests shareholder money, rose to 10.7 percent in 2012 from 3.7 percent in 2011. Tangible book value per share, an estimate of how much the company would be worth in liquidation, climbed to $134.06 as of Dec. 31 from $119.72 a year earlier.

'Superior Returns'

"The firm's strategic position provides a solid basis on which to grow and generate superior returns," Blankfein said in the statement.

Full-year revenue jumped 19 percent to $34.2 billion from $28.8 billion in 2011 and net income for 2012 rose 68 percent to $7.48 billion from $4.44 billion. Net earnings for common stockholders increased 191 percent to $7.29 billion, or $14.13 a share, from $2.51 billion, or $4.51, in 2011.

Compensation, the firm's biggest expense, climbed 6 percent to $12.9 billion and amounted to 38 percent of revenue for 2012, down from 42 percent a year earlier.

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