Goldman's net falls 72 pct after Buffett dividend | The Mesh Report

Goldman’s net falls 72 pct after Buffett dividend

the Mesh Report Staff April 19, 2011 0

NEW YORK – Goldman Sachs’ first-quarter income fell 72 percent after the bank paid out $1.64 billion in dividends to redeem preferred shares it issued to billionaire investor Warren Buffett during the financial crisis.

The New York investment bank said Tuesday that it earned $908 million, or $1.56 per share, compared with $3.3 billion, or $5.59 a share in the first quarter of last year.

Excluding the dividend payment, its earnings per common share were $4.38, beating estimates of $3.95 from analysts surveyed by FactSet.

Goldman’s stock rose 1.3 percent to $155.82 in early trading.

Revenue fell to $11.9 billion from $12.8 billion in the same period last year.

The Federal Reserve gave Goldman Sachs Group Inc. permission to repay Berkshire Hathaway last month. Buffett, who is CEO of Berkshire, helped shore up confidence in Goldman Sachs by making a $5 billion investment in the company at the height of the financial crisis in 2008. Berkshire received preferred shares that paid a 10 percent annual dividend.

The Fed had conducted a “stress test” of the 19 largest banks in the first quarter to see if they were strong enough to stand up to another economic downturn. Only banks that passed the test were allowed to make large payments like increasing dividends or, in the case of Goldman, redeeming preferred shares.

In the second quarter Goldman’s earnings will likely be affected by the redemption, which occurred on April 18.

In the first quarter, Goldman set aside $5.23 billion for compensation, down 5 percent from the same period last year.

While revenues from investment banking grew 5 percent to $1.27 billion, the bank’s performance was mixed.

Revenue from underwriting debt and stock grew 23 percent, but revenue from advising on financial transactions fell 23 percent. Revenues from trading fixed income, currency and commodities for clients also fell 28 percent.

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