Goldman Sachs Beats Market Expectations, Plans To Raise Fresh Capital

Post by Sharat on April 14, 2009 · Under Capital Markets, Company News, Equities, International Business News, banking, investments · Comment

Goldman Sachs, the venerable US investment bank turned full deposit taking institution topped market expectations and reported a first quarter profit of US$1.81 billion and plans to issue US$5 billion in common stock suggesting perhaps that it believes that the global banking crisis has finally turned a corner.

The profit Goldman turned in the first quarter 09 compares with a US$2.12 billion loss in the last quarter 08.

The banking group announced that it had earnings per share of $US3.39 after the market closed, well in excess of the consensus market forecast for $US1.33 dollars per share.

Goldman chairman and chief executive, Lloyd Blankfein, said in the statement: “Our results reflect the strength and diversity of our client franchise, the resilience of our business model and the dedication and focus of our people.”

Goldman changed the scheduling of its earnings announcement which had previously been set for early Tuesday morning US time, before the markets opened; instead the bank surprised everyone by making its announcement after the market closed on Monday.

Separately the Goldman Sachs also said it would raise approximately US$5 billion in new capital by issuing fresh equity, to be used to repay US$10 billion in Federal TARP money.

Goldman said it would serve as the sole underwriter for the public sale offer of $US5 billion of its common stock.

One of the major US banks undergoing stress tests by federal authorities to determine their viability, Goldman said it hoped the capital raised in the share offer would allow it to repay all of the public money injected through the Treasury’s Troubled Asset Relief Program.

“After the completion of the stress assessment, if permitted by our supervisors and if supported by the results of the stress assessment, Goldman Sachs would like to use the capital raised plus additional resources to redeem all of the TARP capital,” the company said.

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