Goldman Sachs 1st-quarter profit falls 21%

Goldman Sachs Group Inc, the fifth-biggest US bank by assets, posted a 21 per cent drop in profit, a smaller decline than analysts estimated, as trading revenue recovered from a weak fourth quarter.

First-quarter net income fell to $2.74 billion from $3.46 billion a year earlier, the New York-based firm said today in a statement. Earnings per share, which includes the cost of preferred dividend payments to Warren Buffett’s Berkshire Hathaway Inc, dropped to $1.56 from $5.59 a year earlier. The average estimate of 16 analysts surveyed by Bloomberg was for earnings per share of 81 cents.

Under Chairman and Chief Executive Officer Lloyd C Blankfein, 56, Goldman Sachs has relied on fixed-income, currencies and commodities trading for the biggest piece of its revenue. After reaching a record in 2009, earnings failed to attain their year-earlier levels in the last four quarters as competition and regulation increased. Wall Street’s fixed-income trading revenue in the fourth quarter dropped to the lowest level since the financial crisis.

“Trading was good this quarter, not bad,” Brad Hintz, an analyst at Sanford C Bernstein & Co who recommends buying Goldman Sachs shares, said before the earnings were reported. “There’s been a lot of concern in the marketplace about whether what we saw in the fourth quarter was an early warning of a continuing slowdown in fixed income.”

Goldman Sachs fell $1.35, or 0.9 per cent, to $153.78 yesterday on the New York Stock Exchange, bringing the year-to- date decline to 8.6 per cent.

Pay Pool Falls
Goldman Sachs Group Inc, the fifth-biggest US bank by assets, set aside $5.23 billion to pay employee salaries, bonuses and benefits in the first quarter, down five per cent from a year earlier.

The compensation and benefits expense, the firm’s biggest cost, is enough to pay each employee $147,825 for the quarter, down 11 per cent from $165,952 a year earlier, New York-based Goldman Sachs said today in a statement. The bank employed 35,400 people at the end of March, up seven per cent from a year earlier even after the firm cut 300 jobs in the first quarter.

Goldman Sachs has reduced pay since 2007, when Chairman and Chief Executive Officer Lloyd C Blankfein was awarded a record $67.9 million bonus and the firm’s average compensation per employee was $661,490 year average pay per employee dropped 14 percent to $430,700 as the firm set aside 39 percent of revenue for compensation. The ratio of compensation to revenue was 44 percent in the first quarter, up from 43 percent a year earlier.

JPMorgan Chase & Co., the second-biggest U.S. bank by assets, set aside $3.29 billion in the quarter to compensate employees at its investment bank, or an average $124,300 per person, according to the New York-based bank’s earnings report last week.

Blankfein, 56, was awarded $18 million in stock and cash bonuses for his 2010 performance, double his $9 million all- stock award for 2009. Blankfein and six other senior officers received no bonuses for 2008.