Goldman income flat as cost cuts help offset 20% fall in revenues

NEW YORK: Goldman Sachs Group, the world’s most profitable securities firm before the financial crisis, said earnings were little changed as the bank cut costs in response to a 20% drop in revenue. The firm increased its dividend 10%.

Shares of the company fell as revenue of $6.72 billion fell short of the $7.35 billion average estimate of 17 analysts surveyed by Bloomberg. 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 company said on Thursday.

Chief executive officer Lloyd C Blankfein, 59, is lowering expenses to show investors his firm can deliver higher returns while it waits on a cyclical climb in trading and investment-banking revenue that hasn’t arrived. 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, which manages more than $900 million, said before the results were announced. “We’re still optimistic, though the third quarter wasn’t a home run by any means.”

Goldman Sachs declined 2.26% to $158.59 at 21:52 India time. The stock had gained 27% this year through Wednesday after advancing 41% in 2012. The shares are still below their pre-crisis peak of $247.92 on October 31, 2007.

Expenses fell 25% to $4.56 billion. Compensation, the firm’s biggest cost, dropped 35% to $2.38 billion and amounted to 35% of revenue for the quarter, down from 44% a year earlier. The ratio was 38% for all of 2012. Fixed-income, currency and commodity trading revenue was $1.29 billion, excluding a $47 million accounting adjustment, down 47% from a year earlier. That compared with analysts’ estimates of $1.85 billion from Sanford C Bernstein’s Brad Hintz and $2.04 billion from Richard Staite at Atlantic Equities.

JPMorgan, the biggest US 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.