Goldman Sachs Trading Revenue May Beat Record

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Goldman Sachs Trading Revenue May Beat Record, Moszkowski Says

By Christine Harper




July 9 (Bloomberg) -- Goldman Sachs Group Inc. is on track to beat its 2007 trading-revenue record, enabling it to boost compensation by an estimated 64 percent from last year, according to Bank of America Corp. analyst Guy Moszkowski.

Goldman Sachs has “unmatched risk-taking/risk-management skills in a market that strongly rewards these because of decline in competitor risk appetite,” Moszkowski wrote in a note to investors today. The New York-based firm “appears on track to accrue significantly more comp than ‘08, despite little change in headcount.”

Six months ago, Goldman Sachs was supported by $10 billion from the U.S. Treasury and relied on government guarantees to issue debt. Moszkowski predicts the company will reap $26.45 billion from trading this year, a gain from $25.36 billion in 2007 when the firm shattered Wall Street profit records.

Moszkowski said the firm will set aside 44.2 percent of total revenue to pay compensation and benefits, letting it pay workers $17.92 billion compared with $10.9 billion last year. Goldman Sachs had 27,898 employees at the end of March. If that number remains unchanged and Moszkowski’s compensation estimate is correct, it would mean an average of $642,447 per employee.

Moszkowski raised his recommendation on Goldman Sachs shares today to “buy” from “neutral” after determining that second-quarter earnings will be higher than analysts expect. Moszkowski increased his estimate for Goldman Sachs’s earnings to $3.90 a share from $2.92. The average estimate of analysts surveyed by Bloomberg was for $3.52 per share.

Goldman Sachs shares have risen 64 percent this year and closed at $138.55 yesterday in New York Stock Exchange trading.

The bank’s debt and equity underwriting, trading and fixed income operations may have boosted profit in the quarter amid “muted” competition, New York-based Moszkowski wrote.

“Goldman Sachs derives a high proportion of revenue from trading and market-making activities,” he wrote. “Second quarter could be a record quarter for Goldman in equity underwriting.”

The brokerage increased its 2009 and 2010 profit forecasts for Goldman Sachs, and raised its share-price estimate to $175 from $144.

To contact the reporters on this story: Christine Harper in New York at charper@bloomberg.net.
Last Updated: July 9, 2009 09:35 EDT

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