Assailed by critics on all sides, Goldman Sachs did what it does best on Tuesday, smashing estimates for its first-quarter results and setting aside $5.23bn (£3.2bn) to pay its staff.
The bank reported net revenues of $11.89bn and net earnings of $2.74bn for the first quarter which ended on 31 March, 2011. Profits were down 21%, held back by a payout to billionaire investor Warren Buffett, but the figures comfortably beat analysts' forecasts. Diluted earnings per common share were $1.56. Analysts surveyed by Thomson Reuters had expected Goldman to post first-quarter earnings of 82 cents a share, down from $5.59 a year earlier.
The bank's results were hampered by the decision to buy back $5bn of shares from Warren Buffett. The billionaire investor made a $5bn bet on Goldman at the low point of the financial crisis in a move that was seen as a major vote of confidence in the bank. Goldman bought back the preferred stock from Buffett's Berkshire Hathaway during the quarter, reducing its earnings by $1.6bn.
The $5.23bn set aside to pay salary, bonuses and other compensations was 5% lower than the money set aside by the bank in the first quarter of last year but 132% higher than the $2.25bn set aside in the last quarter. The ratio of compensation and benefits to net revenues for the first quarter of 2011 was 44%, compared to 43% for the same quarter last year.
"We are pleased with our first-quarter results," said Lloyd Blankfein, chairman and chief executive. "Generally improving market and economic conditions, coupled with our strong client franchise, produced solid results. Looking ahead, we continue to see encouraging indications for economic activity globally."
Excluding Buffett's payment, the firm posted a per share profit of $4.38. Investment banking revenues rose 5%, investment management revenues overall rose 16% to $1.3bn. Institutional client services revenues dropped 22%.
Last year's first quarter was a trading bonanza for many Wall Street banks and has proved hard to match with both Bank of America and Citigroup reporting big declines in trading revenues from the year-ago period. Goldman's arch-rival JP Morgan Chase managed to post strong trading results last Wednesday, especially in fixed income, currencies and commodities.
Goldman's results come as speculation mounts that Blankfein is considering stepping down. Friends told the New York Times that the 56-year-old is "exhausted" and would be leaving "when he could do so gracefully, without the move appearing to be anything but voluntary".
Last week Senator Carl Levin singled out Goldman for particular criticism after the publication of the 650-page bipartisan report, Wall Street and the Financial Crisis: Anatomy of a Financial Collapse.
Levin said "Goldman clearly misled their clients and they misled Congress," and said he would push for the department of justice to investigate whether criminal charges should be brought against Blankfein and other executives.
In a statement the bank said: "While we disagree with much of the report, we take seriously the issues explored by the subcommittee. We recently issued the results of a comprehensive examination of our business standards and practices and committed to making significant changes that will strengthen relationships with clients, improve transparency and disclosure and enhance standards for the review, approval and suitability of complex instruments."