Goldman has released earnings which appear to be substantially better than Street forecasts of $0.81 in EPS and $10.21 billion in revenue. The firm reported earnings of $1.56 (though this is still a sizable drom from the $5.59 a year earlier. Revenues came at $11.894 billion beating expectations but less than the $12.775 billion a year prior. The GS EPS was impacted by $1.64 billion in Berkshire dividend related charges, absent which EPS would have been $4.38. Goldman reported $5.233 billion in operating expenses, on total staff of 35,400 (a drop of 300 from last quarter). Annualizing the firm's Compensation and benefits line of $5,233 implies Goldman is runrating to pay its employees an average of $591,299/employee. Lastly, and perhaps just as importantly, the bank notes it lowered its total VaR from 120 to 113 sequentially (and down from 161 a year prior). Equity VaR in particular was curious as it plunged by nearly half from a year earlier: from 88 to 49. Oddly, as most other banks are relevering their risk taking activities, Goldman is actively curbing them.

Earnings highlights:

The firm ranked first in worldwide equity and equity-related offerings, common stock offerings and initial public offerings for the year-to-date. (3)

Institutional Client Services generated net revenues of $6.65 billion, including Fixed Income, Currency and Commodities Client Execution net revenues of $4.33 billion, which reflected improved client activity levels.

During the quarter, the firm gave notice of redemption for the firm’s Series G Preferred Stock held by Berkshire Hathaway. Despite the impact of the preferred dividend of $1.64 billion related to the redemption, both book value per common share and tangible book value per common share (4) increased slightly during the quarter. Excluding the impact of this preferred dividend, both book value per common share and tangible book value per common share increased approximately 3%(4) during the quarter.

Looking at the key Institutional Client Services and Investment Banking sectors in particular:

Net revenues in Institutional Client Services were $6.65 billion, 22% lower than a strong first quarter of 2010 and 83% higher than the fourth quarter of 2010.



Net revenues in Fixed Income, Currency and Commodities Client Execution were $4.33 billion, 28% lower than a particularly strong first quarter of 2010. Client activity levels improved during the first quarter of 2011, resulting in solid performances in credit products, interest rate products, currencies and mortgages, although net revenues in each were lower compared with the first quarter of 2010. Net revenues in commodities were also solid and were higher compared with the same prior year period.



Net revenues in Equities were $2.32 billion, 7% lower than the first quarter of 2010, reflecting lower net revenues in equities client execution. The decline in equities client execution compared with the first quarter of 2010 reflected lower net revenues in derivatives and shares. This decrease was partially offset by higher commissions and fees, reflecting higher transaction volumes. Securities services net revenues were essentially unchanged compared with the first quarter of 2010. During the first quarter of 2011, Equities operated in an environment generally characterized by an increase in global equity prices and slightly lower average volatility levels.



Net revenues in Investment Banking were $1.27 billion, 5% higher than the first quarter of 2010 and 16% lower than the fourth quarter of 2010. Net revenues in Financial Advisory were $357 million, 23% lower than the first quarter of 2010. Net revenues in the firm’s Underwriting business were $912 million, 23% higher than the first quarter of 2010, due to strong net revenues in debt underwriting, which were significantly higher compared with the first quarter of 2010, as well as higher net revenues in equity underwriting. The increase in both debt and equity underwriting primarily reflected an increase in client activity. The firm’s investment banking transaction backlog increased compared with the end of 2010.

And a snapshot of the firm's VaR:

Full report: