Goldman Sachs Q1 profit doubles

Goldman Sachs Group Inc. said Tuesday its first-quarter profit almost doubled to $3.3 billion US as its trading business again surpassed the rest of the financial industry.

It was a bit of good news for the investment bank as it faces a U.S. government civil fraud charge. The stock, however, slipped  $3.34 to $159.98 in New York trading.

Goldman Sachs earned $5.59 a share on revenue of $12.78 billion as bond, commodities and currency trading buoyed its profits for yet another quarter. That was well above expectations of analysts surveyed by Thomson Reuters.

In last year's fourth quarter, the company had earned a record $4.79 billion.

Goldman Sachs also reported sharply higher fees from underwriting stock and debt offerings in the latest quarter.

SEC allegations

Even as it reported another strong quarter, the bank is facing a major challenge after being charged last Friday in a civil fraud lawsuit by the Securities and Exchange and Commission.

The SEC alleges that Goldman Sachs and one of its vice-presidents misled investors who bought complex financial products that were expected to fail.

In a release, CEO Lloyd Blankfein thanked the bank's supporters without specifically mentioning the SEC case while seeming to allude to it.

"In light of recent events involving the firm, we appreciate the support of our clients and shareholders, and the dedication and commitment of our people," he said.

The company said it set aside $5.5 billion US in the first three months of the year to pay employee salaries and bonuses, up 17 per cent from last year. However, Goldman Sachs said the percentage of revenue set aside for compensation in the quarter fell from 50 per cent to 43 per cent year-over-year.

U.S. banks' high levels of compensation, including bonuses, have come under heavy criticism since the financial crisis that began in 2008. Legislators and the public have complained that the banks were rewarding the same employees whose risky trading practices helped plunge the United States into recession.

Goldman Sachs, because of its great success in trading, has come under particular sharp criticism.

Goldman's trading of risky assets once again generated the bulk of its profits. Revenue from trading of bonds, currencies and commodities rose 13 per cent in the quarter to $7.39 billion.

Investment banking revenue, considered the foundation of the company's business, rose to $1.18 billion, up 44 per cent from last year. Investment banking includes advising on corporate deals and raising capital for stock and bond issues.

Goldman Sachs, which has outperformed other financial companies for years, has been the strongest bank throughout the financial crisis. It had less exposure to toxic mortgage-related securities than other companies and also has been more aggressive in its trading.

Accused exec takes a break

Goldman Sachs also said Tuesday that the executive at the centre of the civil fraud case is taking some time off. Fabrice Tourre, who was named in the SEC lawsuit against the firm, is taking a break from his position at the firm's London offices, Goldman Sachs spokesman Michael Duvally said.

"It is voluntary. He decided to take some time off," Duvally said.

Tourre was a vice-president in his late 20s when the allegedly fraudulent activities took place in 2007. Tourre, the SEC said, boasted to a friend that he was able to put questionable deals together as the mortgage market was unravelling in early 2007.

Tourre, 31, has since been promoted to executive director of Goldman Sachs International in London.

Britain to investigate

Britain's financial regulator said Tuesday that it is launching a full-blown investigation into Goldman Sachs International after the SEC filed charges against the bank.

The Financial Services Authority said that it will be liaising closely with the SEC in its review.

British interest in the case is likely to focus on the Royal Bank of Scotland, which paid $841 million to Goldman Sachs in 2007 to unwind its position in a fund acquired in the takeover of Dutch Bank ABN Amro, according to the complaint filed in the United States.