Goldman Sachs Group Inc reported an 11 percent drop in quarterly profit as client activity remained constrained and fixed-income revenue shrank, but both earnings and revenue beat market estimates and the Wall Street bank's shares rose. Goldman said net income fell to $1.95 billion, or $4.02 per share, in the first three months of the year from $2.19 billion, or $4.29 per share, in the same period of 2013.
Analysts on average had expected earnings of $3.45 per share, according to Thomson Reuters I/B/E/S. Total net revenue fell 8 percent to $9.33 billion, but beat the average estimate of $8.70 billion. Goldman's shares, which had fallen more than 20 percent since the start of the year to Wednesday's close, were up 1.9 percent at $160.28 before the opening bell.
"Investment Banking and Investment Management generated solid results, while market sentiment shifted throughout the quarter, constraining client activity in various parts of our franchise," Chairman and Chief Executive Lloyd Blankfein said in a statement. Most of Goldman's rivals also reported a drop in revenue from fixed-income trading in the quarter, but Goldman has more at stake than others because it has a less diverse business mix.
Goldman's revenue from fixed income, currency and commodities (FICC) trading fell 11 percent from a year earlier to $2.85 billion in the quarter ended March 31. Fixed income investors have been holding off on trading in the face of uncertainty about how quickly the US Federal Reserve will tighten monetary policy. Goldman makes most of its money from trading and investing in capital markets. This sets it apart from J.P. Morgan Chase & Co, Citigroup Inc and Bank of America Corp, which have big consumer lending businesses, and Morgan Stanley , which has a large wealth-management arm.
Revenue in the company's investing and lending business fell 26 percent to $1.53 billion, reflecting the decline in fixed-income activity. Investment management revenue rose 20 percent to $1.57 billion. With business conditions remaining tough, Goldman has been cutting costs, particularly compensation. Compensation expenses fell 8 percent to $4.01 billion in the latest quarter while total operating expenses dropped 6 percent to $6.31 billion.