Goldman lays out flashy wares for stock sale

If the Wall Street investment bank was supposedly trampled by the panic of 2008, someone forgot to tell Goldman Sachs. The credit crisis killed off Bear Stearns, Lehman Brothers and ended Merrill Lynch’s independence. Goldman, the last of its peers to go public, has recovered from its fourth-quarter loss to make $1.8bn in the first three months of the year – more than double analysts’ estimates.

And that’s despite some poor numbers in some of its core businesses: incentive fees on hedge funds were virtually non-existent, principal investments recorded a $1.4bn net loss and depressed equity and mergers and acquisitions markets hit investment banking fees and prime brokerage revenue.

In truth, it’s hard not to gander at Goldman’s earnings and conclude the firm, which along with rival Morgan Stanley sought refuge by becoming a bank holding company, is trying to prove the investment bank model it appeared to have dropped is still alive and kicking.

For starters, the firm’s black box trading operations provided most of the juice. Second, in an act that seems like biting its thumb to Congress, Goldman set aside more revenue to pay staff, both as a percentage of revenue and on an absolute basis, than last year.

And Goldman executives also appear to have called a halt to shrinking the group’s balance sheet. Sure, assets only rose by 5% since last quarter to $925bn, but that’s a stark change to the deleveraging that has beset the financial sector for a year or more.

Those are some punchy tactics for a firm hoping to convince the Treasury to allow it to pay back the $10bn of taxpayer-funded capital foisted upon it last autumn. But Goldman appears to have the numbers to back it up – and to persuade shareholders to stump up for its $5bn stock sale. If Goldman is any evidence, Wall Street isn’t in its coffin just yet.