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Volcker Rule Weighs On Goldman Sachs Earnings Growth

Goldman's earnings were buoyed by sharp year-over-year revenue gains in the bank's debt and equity underwriting units, which drove overall investment banking revenue higher by 36% to $1.57 billion.

The firm's investment banking unit outperformed competitors JPMorgan (JPM) and Citigroup (C), who reported revenue of $1.4 billion and $1.1 billion respectively, according to calculations from Staite of Altantic Equities.

The analyst, however, noted the 10% decline in Goldman's trading revenue was slightly worse than 5% declines posted by JPMorgan and Citigroup. Bank of America (BAC) reports earnings on Wednesday.

Net revenue from the firm's Institutional Client Services unit, more generally known as trading, came in at $5.14 billion, dropping 10% from the first quarter of 2012.

Goldman's investment management unit posted $1.32 billion in revenue, reflecting a 12% rise from the first quarter of 2012. The unit posted $9 billion in client asset outflows, largely on money market assets and alternative investments, even as the firm saw a rise in equity and fixed income assets.

"Better than expected investment banking and investment management revenues roughly offset the revenue miss in trading," Brennan Hawken, a UBS analyst, wrote in a note to clients.

In the first quarter, Goldman Sachs repurchased 10.1 million shares at a total cost of $1.52 billion. The firm also said its Board of Directors authorized the firm to buy back an additional 75 million shares, putting its total authorization at 86.4 million shares or roughly 18.5% of shares outstanding.

Operating expenses of $6.72 billion were unchanged from the first quarter of 2012, as the ratio of compensation and benefits to revenue fell marginally from year-ago levels to 43%.

In a proxy to shareholders released on Friday, Goldman disclosed that chief executive Lloyd Blankfein earned a total of $21 million for 2013, split between a salary of $2 million, a $5.7 million cash bonus and $13.3 million in restricted stock awards.

Equity compensation as a percentage of variable compensation was 70% for Blankfein, COO Gary Cohn, CFO David Viniar, Vice Chairman J. Michael Evans and Vice Chairman John Weinberg, who earned between $17 million and $19 million in total compensation for 2012.

"We are pleased with our performance for the quarter," Lloyd C. Blankfein, Goldman Sachs chief executive, said in a statement Tuesday.

"Our strong client franchise across our businesses drove generally solid results. Still, the potential for macro-economic instability was felt in the quarter and constrained overall corporate and investor activity."

For more on Goldman Sachs see why the company's bottom line will be its key earnings driver in 2013.

See what Warren Buffett's Goldman Sachs stake means for Wall Street. http://www.thestreet.com/story/11880216/1/the-math-behind-warren-buffetts-goldman-sachs-deal.html

-- Written by Antoine Gara in New York

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