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Goldman doubles profit, plans layoffs

By Christina Rexrode
Associated Press / July 20, 2011

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NEW YORK - Goldman Sachs Group more than doubled its profits last quarter, to $1.05 billion, but it wasn’t enough to satisfy investors.

The results, announced yesterday, came in below what analysts were expecting because of a 63 percent drop in bond and currency trading. Goldman attributed the decline to investors being nervous about global economic issues.

Goldman also said it would eliminate as many as 1,000 jobs to cut costs.

The investment bank earned $1.85 per share in the three months ended in June, below the $2.35 analysts surveyed by FactSet were expecting. Revenue was also less than expected, declining 18 percent from the same period a year earlier, to $7.3 billion. Analysts had forecast $8.2 billion.

Goldman earned $453 million in the same period a year ago, or 78 cents per share.

The bank’s chief financial officer, David Viniar, told analysts that Goldman had reduced its “value at risk,’’ a measure of how much money it could lose in any given day, to the lowest level since late 2006. That ramping down of risk “may have been a bad decision, it may not have been a bad decision. We don’t know and we may not know for a while,’’ Viniar said.

Glenn Schorr of Nomura Equity Research asked Viniar whether the results reflected just one poor quarter or whether there were serious problems.

Viniar said bank hadn’t been able to predict market swings as accurately as before because the volatility was related to political uncertainty rather than economic fundamentals.

Goldman will be cutting about $1.2 billion in expenses, which could include as many as 1,000 employees nationwide, Viniar said. He also said the bank will be “prudent’’ with spending and maintaining high levels of reserves.

Investment banking revenue jumped 54 percent on an increase in mergers and acquisitions and underwriting other kinds of deals. Revenue from investment management, rose 14 percent.

Viniar said the bank would consider how to increase its asset management business, which can provide more stable returns, relative to trading.

Goldman paid a $550 million fine last year - the largest ever paid to the Securities and Exchange Commission - after it was accused of misleading investors about mortgage securities.