Goldman’s Trading Performance Worse Than Competitors

Goldman Sachs (NYSE:GS) managed to beat analysts’ dismal predictions, but falling revenues from debt trading are still pulling business down. The investment bank reported first-quarter earnings per share of $3.92, beating average estimates of $3.55, but net income was down to $2.11 billion, from $2.74 billion a year earlier. The biggest culprits behind the 23 percent fall were trading bonds, currencies, and commodities.

Trading revenues have been declining for most major banks. But while most have done better this quarter compared to analysts’ morose expectations, Goldman Sachs lagged behind competitors JPMorgan (NYSE:JPM) and Citigroup (NYSE:C). Goldman Sachs’ fixed-income trading revenue fell 20 percent to $3.46 billion, while JPMorgan revenue declined 11 percent to $4.66 billion and Citigroup dropped just 4 percent to $3.65 billion.

Goldman did increase its quarterly dividend for the first time in six years, raising it to 46 cents a share, from 35 cents a share. Net income attributable to common shareholders climbed to $2.07 billion from $908 million, or $1.56 per fully diluted share, a year earlier.

Total revenue fell 16 percent to $9.95 billion from $11.9 billion a year earlier, but again beat the $9.41 billion average estimate. Operating expenses fell to $6.77 billion from $7.85 billion a year earlier. Compensation fell 16 percent to $4.38 billion, from $5.23 billion.

The bank has been cutting costs as revenue declines, and is hoping that an improved market at home and a business expansion internationally will help restore profit growth. “Our mix of businesses gives the firm significant room for revenue growth as economic and market conditions continue to improve,” chief executive Lloyd C. Blankfein said in a statement.

Blankfein said accusations made by former derivatives salesman Greg Smith will be investigated. Smith resigned last month claiming the firm put its own needs ahead of its clients. Goldman has been struggling recently to match the high profits of its earlier years and received a financial lifeline last year from Berkshire Hathaway (NYSE:BRK) chairman Warren Buffett, who was awarded preferred shares in the company in return.

On Tuesday, the stock fell to $116.81 in early trading from $117.73 at the close on Monday. The stock declined 46 percent in 2011, but is up 30 percent this year.