NEW YORK — Goldman Sachs Group Inc., Wall Street's nimble giant, said on Thursday third-quarter earnings soared, as the investment bank cashed in on trading gains and investments with the company's own money.
The investment bank, considered to be the most profitable in Wall Street history, also made plans to reward its employees well. It set aside $5.35 billion for benefits and compensation during the quarter, putting bonuses on track to set a record this year.
Profit jumped to $3.19 billion, or $5.25 a share, from $845 million, or $1.81 a share, a year earlier. Revenue more than doubled to $12.37 billion.
That easily beat projections for $4.24 per share on revenue of $11 billion, according to analysts surveyed by Thomson Reuters.
"Although the world continues to face serious economic challenges, we are seeing improving conditions and evidence of stabilization, even growth, across a number of sectors," Chairman and Chief Executive Lloyd Blankfein said Thursday.
Prescient bets that subprime mortgages would tank and its avoidance of other messes have allowed Goldman to take on more risk as rivals lick their wounds.
JPMorgan Chase & Co. raised expectations for the sector Wednesday by reporting soaring third-quarter profit, again led by investment banking. JPMorgan's results helped lift Goldman's stock to its highest level since May 2008.
Goldman's business from fixed income, currency and commodities trading again bolstered its bottom line, with revenue more than tripling. Revenue from its principal investments soared 55% from second quarter after losing money a year earlier.
Investment-banking revenue fell 31% and financial advisory revenue dropped 47%.
The bank also posted a revenue gain of $1.26 billion in revenue from principal investments, which includes a gain of $344 million related to its investment in the Industrial & Commercial Baak of China Ltd.
Tier 1 capital ratio, a key measure of financial strength, was 14.5%, up from 13.8% in the second quarter.
The New York-based investment bank has set aside $16.71 billion for compensation and benefits during the first nine months of 2009, which is enough to pay $568,367 to each of its employees. The performance during the third quarter puts compensation on track to beat the record $20.2 billion paid out during the market's peak two years ago.
Levels are already outpacing the $10.9 billion doled out in 2008 at the height of the financial crisis. Criticism about exorbitant pay packages reached a crescendo last year after Goldman Sachs and other Wall Street banks were propped up by billions of dollars in government bailout money.
Blankfein, who agreed not to take a bonus last year after being awarded a record-setting $68.5 million in salary and bonus for 2007, has made compensation practices an issue during the past year. He has said during several speeches this year that Goldman will tie compensation to restricted stock instead of cash, thereby ensuring that is linked to the firm's long-term health.
While quarterly results topped average expectations, shares dropped 2.3% premarket to $187.85 after rising 2.7% Wednesday. Shares generally were lower pre-market. Goldman Sachs' stock has more than doubled so far this year.