Goldman Sachs Group Inc., the world’s most profitable securities firm before the financial crisis, reported earnings that beat analysts’ expectations despite falling revenue.
Third-quarter net income rose to $1.52 billion, or $2.88 a share, from $1.51 billion, or $2.85, a year earlier, the financial institution said today.
Chief Executive Officer Lloyd C. Blankfeins strategy of lowering expenses to show investors his firm can deliver higher returns seems to give good results. The stock has traded below 1.5 times book value for the past 3 1/2 years, the longest such streak in the company’s history.
“Goldman typically outperforms, and cost controls help for the time being,” Keith Davis, an analyst at Farr, Miller & Washington LLC, which manages more than $900 million, said before the results were announced. “We’re still optimistic, though the third quarter wasnt a home run by any means.”
Companys slowing revenue could be due to clients pulling back amid speculation the Federal Reserve would slow its $85 billion in monthly bond buying. Fed Chairman Ben S. Bernanke said last month that the central bank decided not to taper its stimulus yet.
JP Morgan, the biggest U.S. bank by assets, last week reported its first quarterly loss under CEO Jamie Dimon as the firm took a $7.2 billion charge to cover the cost of mounting litigation and regulatory probes. Citigroup Inc. on Oct. 15 reported a $3.23 billion profit that missed analysts’ estimates as bond-trading and mortgage revenue fell. Both companies are based in New York.
“The role we play in that business is very, very important to users in the market,” Blankfein said in an interview with CNBC. “Without us in that market, a good credit, a regulated company, the outcomes won’t be very good for the users of the market.”
Warren Buffett’s Berkshire Hathaway Inc. earlier this month exercised rights obtained through a 2008 deal to receive 13.1 million shares of Goldman Sachs stock. This move made Berkshire the investment bank’s seventh-largest stockholder as Buffett and Blankfein have said that Berkshire intends to remain a long-term investor.
Goldman Sachs rose 2.9% to $162.25 in New York trading yesterday, and has gained 27% this year after recording 41% increase in 2012. The shares are still below their peak of $247.92 on Oct. 31, 2007.