Goldman Sachs Group Inc. capped the most profitable year ever for a Wall Street firm by almost doubling fourth-quarter earnings on trading, underwriting, and investments in Asia.
Net income was $3.15 billion, or $6.59 a share, in the three months that ended Nov. 24, versus $1.63 billion, or $3.35, a year earlier, the company said. The average estimate of 14 analysts surveyed by Bloomberg was $6.17 a share.
Full-year net income of $9.54 billion exceeded fiscal 2005's by 70%.
Principal investments, including gains in the value of stakes that Goldman bought in companies such as Industrial and Commercial Bank of China Ltd., rose 64%, to $1.4 billion.
It was the third consecutive year of record earnings for Goldman. Though trading remained the dominant source of profit, Lloyd Blankfein, who took over as chief executive from Henry Paulson in June, said that Goldman also reaped gains from bigger investments in leveraged buyouts and that it paid out a smaller percentage of revenue in compensation.
Jeff Harte, an analyst at Sandler O'Neill & Partners LP, said: "Principal investment gains were more than I was anticipating, so that boosted revenue. Secondly, compensation expense was lower than I was expecting despite the additional revenue. So you put those two together, it's a very strong quarter."
Return on equity was 41.5% in the quarter, compared with 25.2% a year earlier. Full-year return on equity was 32.8%, versus 21.8% a year earlier.
Revenue at Goldman's fund management division rose 19%, to $933 million, as a 33% increase in fees for overseeing assets outstripped a 78% drop in incentive fees, which are tied to the funds' performance.
Revenue from investment banking rose 42%, to $1.34 billion. Goldman said its investment banking backlog at the end of fiscal 2006 was higher than at the end of fiscal 2005. Fees for advising on takeovers rose 15%, to $627 million, while underwriting revenue rose 78%, to $717 million.
Goldman worked on $145 billion of deals completed during the fiscal fourth quarter, compared with $176 billion a year earlier, according to Bloomberg.
The firm managed $15.8 billion in equity offerings in the quarter, up from $9.3 billion a year earlier, Bloomberg data shows, and sales of high-yield or "junk" bonds swelled to $3.8 billion, from $2.2 billion a year earlier. The largest stock offering arranged by Goldman was the $12.2 billion sale of shares in Telstra Corp., Australia's biggest phone company.
Among Goldman's other gains on principal investments was $500 million it reaped on its stake in Japan's Accordia Golf Co., David Viniar, its chief financial officer, said in a conference call.
