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Goldman 4Q beats Street
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December 21, 1999: 10:25 a.m. ET
Investment bank posts earnings of $1.54 a share, above expectations
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NEW YORK (CNNfn) - Investment bank Goldman Sachs Inc. Tuesday unveiled better-than-expected fiscal fourth-quarter profit, aided by a large number of new stock offerings it helped bring to market and robust merger and acquisition activity.
Goldman, which advised companies on $1 trillion worth of announced merger deals this year, posted pro-forma earnings of $756 million, or $1.54 a diluted share in the quarter ended Nov. 26. That compared to a loss of $8 million, or 2 cents, in the year-ago period. Analysts polled by First Call had expected earnings of $1.25 a share.
The pro-forma results are presented as if Goldman, which sold shares to the public in May, had been a public company all year. The figures also exclude non-recurring items such as the cost of stock awards to employees and retirement contributions. Including those costs, Goldman earned $720 million in the fourth quarter, or $1.48 a share.
Revenue for the quarter almost doubled, rising to $6.7 billion from $3.4 billion.
Surging fees
Goldman Sachs (GS), which went public in May in one of the most successful initial public offerings in history, has benefited from a surge in fees related to advising on mergers and acquisitions, as well as gains from underwriting a swath of IPOs and from trading activity in this year’s stellar bull market. The firm ranked No. 1 in worldwide mergers and acquisitions for the calendar year.
Indeed, many U.S. investment banks are riding high on a global boom in mergers and acquisitions and IPOs of start-up companies. Morgan Stanley Dean Witter (MWD) Monday unveiled record fourth-quarter and full-year profits thanks in large part to stock trading, IPO and M&A activity.
Investment bankers typically take a percentage of a deal's value, making M&A and IPOs the most lucrative businesses on Wall Street. Goldman's investment banking fees rose to $1.3 billion in the fourth quarter, up 59 percent from the 1998 quarter and up 13 percent from the third quarter.
Revenues from trading stocks and bonds and investment totaled $1.25 billion in the quarter, reversing a $663 million loss a year ago but declining 14 percent from the third quarter. The reason for the drop was lower revenues from trading bonds, currencies and commodities, Goldman said in a statement.
Money to manage
Revenues from money management and securities services rose to $917 million, up 21 percent from a year ago and up 13 percent from the third quarter. Assets under management grew 17 percent to $258 billion.
For the year, Goldman Sachs earned $2.6 billion, or $5.27 a share, compared to $1.3 billion, or $2.62, in the year-earlier period. Revenue for the year surged 57 percent to a record $13.3 billion.
Since it began trading on May 4, Goldman Sachs’ shares have surged 56 percent. Its stock fell 1-11/16 to 80-3/16 in mid-morning trade. 
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Goldman Sachs
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