Goldman Sachs loses $428 million in third quarter

October 21, 2011 - 7:30 AM
Earns Goldman Sachs

FILE - This June 29, 2011 file photo, shows the headquarters building of Goldman Sachs, in New York. Goldman Sachs Group Inc. posted a rare quarterly loss, performing worse than analysts had expected in the third quarter. (AP Photo/Richard Drew, File)

NEW YORK (AP) — Goldman Sachs Group Inc. reported a third-quarter loss of $428 million Tuesday as revenue from underwriting stocks and bonds plunged. It was only the second quarterly loss for the investment bank since it went public 12 years ago.

Investors were unfazed by the loss, which had been widely expected due to the turmoil in financial markets this summer. Goldman's stock rose 0.9 percent to $97.72 in early trading.

UBS analyst Brennan Hawken said the stock, which had fallen from about $128 since second-quarter earnings were reported three months ago, had already priced in the impact of the dismal third-quarter results.

The latest loss was equivalent to 84 cents per share. The bank earned $1.7 billion, or $2.98 per share, in the same period a year ago. Revenue slumped 60 percent to $3.6 billion, missing analysts' estimates.

Investment banking had been a bright spot in Goldman's previous quarter, but turbulent markets this summer and nervousness over political wrangling in Washington led companies to hold off on new stock and bond offerings. Underwriting revenue plunged 61 percent.

Revenue from bond and currency trading recovered slightly from a dismal performance in the second quarter, but was still down 36 percent from a year ago. Goldman's investment and lending unit lost $1.1 billion on its stake in the Industrial and Commercial Bank of China, $1 billion on other stock holdings and $907 million on bonds and loans.

Banking is becoming smaller, simpler and less profitable, as the government clamps down on many of the kinds of business that drove outsized profits, and risky balance sheets, prior to the financial crisis.

Goldman has done better than most big banks throughout the crisis and its aftermath, though it's also been one of the most maligned. The storied investment bank, which like its peers packaged and sold risky mortgage-backed securities before the financial crisis took hold, has been through investigations, fines and other headaches. In the third quarter the bank set aside $59 million for litigation and regulatory proceedings.

Goldman, which has been public for 12 years, has recorded only one other quarterly loss since then, at the end of 2008 at the height of the financial crisis.

The bank said at its last earnings call, in July, that it would eliminate as many as 1,000 jobs to cut costs. Tuesday it said had 34,200 employees, down 1,300 from the previous quarter.