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TheStreet Open House

Goldman Sachs Beats Third Quarter Estimates, Raises Dividend

  • Goldman Sachs reports third-quarter profit of $2.84 per share, beating the consensus estimate of $2.28 a share, according to data compiled by Bloomberg
  • Excluding items, operating profit was $1.51 billion.
  • Net revenue came in at $8.35 billion, beating an estimate of $7.18 billion.
  • The bank boosted its dividend to 50 cents from 46 cents.

NEW YORK ( TheStreet) - Goldman Sachs (GS) reported a better than expected profit as its trading and lending operations outperformed forecasts. The bank also raised its dividend by nearly 10%.

Overall, Goldman Sachs reported an operating profit of $1.51 billion or $2.85 in earnings per share on revenue of $8.35 billion, beating top and bottom line analyst estimates. The bank's earnings beat was driven by a better than expected performance in its fixed income, currency and commodity trading unit that drove overall trading revenue gains and a stronger than expected performance from its investing & lending unit.

Notably, a lack of merger and initial public offering activity cooled performance at Goldman Sachs' investment banking unit, which posted revenue slightly below analyst estimates. Overall, Goldman's FICC trading unit posted revenue of $2.22 billion driving overall trading revenue of $4.18 billion, a 8% rise from the second quarter. Prior to earnings, Wells Fargo analyst Matthew Burnell forecast trading revenue would fall quarter-over-quarter to $3.74 billion.

Goldman's investing and lending unit posted revenue of $1.80 billion, driven by gains in proprietary investments that the bank has made in foreign banks, private equity and stocks. Estimates were for the unit to see revenue of $1.25 billion, according to Burnell, driven by rising asset prices in the third quarter.

Investment banking was a weakness for Goldman Sachs as the bank's top position in equity underwriting and a high standing in M&A advisory and debt underwriting markets failed to overcome general weakness in capital markets activity in the quarter. The unit posted revenue of $1.16 billion, 3% lower than the second quarter and in-line with estimates from Burnell of Wells Fargo.

Meanwhile, as investors in the bank clamor for returns of capital, Goldman Sachs raised its quarterly dividend nearly 10% to 50 cents from 46 cents. Prior to earnings, analysts were mixed on whether the bank would return capital to shareholders by way of dividends or stock buybacks in excess of $1 billion.

Forecasts were for Goldman to earn $7.18 billion in revenue and $2.28 in EPS, according to analyst estimates compiled by Bloomberg. Although Goldman beat on both revenue and profitability, shares were relative unchanged in pre-market trading, rising less than 1% to $125.25.

"This quarter's performance was generally solid in the context of a still challenging economic environment," Lloyd Blankfein, chief executive of Goldman Sacs said in a statement. "We continue to be disciplined in managing our operations and capital, while effectively serving our clients' needs. The focus on these priorities will serve our shareholders and the firm well over the longer term," he added.

In the quarter, Goldman raised its compensation to $3.68 billion for the quarter as revenue moved higher. The bank's ration of compensation to revenue held steady at 44%, in line with analyst estimates from Wells Fargo and KBW.

For more on Goldman Sachs, see why the firm could fall off of the fiscal cliff . Also see why the Goldman is cutting its PE future by half and why it may grow by shrinking, for more on the bank's earnings outlook.

-- Written by Antoine Gara in New York

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