Goldman Sachs Beats Expectations with Q1 Profit of $3.46 Billion

Amid the legal storm building over allegations of securities fraud in the subprime mortgage space, ""Goldman Sachs said Tuesday"":http://www2.goldmansachs.com/our-firm/press/press-releases/current/pdfs/2010-q1-earnings.pdf that its first quarter business dealings turned a hefty profit, more than doubling its numbers from a year ago and coming out far ahead of analysts' expectations.

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The company reported net earnings of $3.46 billion for the first three months of this year, or $5.59 per share. Analysts surveyed by _Bloomberg_ had forecast $4.14 a share. The Q1 numbers compare to net earnings of $1.66 billion, or $3.39 a share, for the same period last year. Net revenues rose to $12.78 billion, from $9.43 billion a year earlier.

""Our performance in the first quarter reflects more signs of growth across the economy and the strength of our client franchise,"" said CEO Lloyd C. Blankfein. ""While we are encouraged by growth prospects for the economy, we continue to put a premium on strong capital and liquidity levels, and disciplined risk management.""

Goldman Sachs' results got their biggest boost from the company's trading and principal investments business, which produced net revenue of $10.25 billion, 43 percent higher than the first quarter of 2009 and 60 percent higher than the fourth quarter of last year.

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As ""DSNews.com previously reported"":http://dsnews.comarticles/goldman-faces-charges-from-sec-for-defrauding-mortgage-investors-2010-04-16, Goldman Sachs was hit with a civil lawsuit on Friday, in which the SEC accused the firm of cheating investors in a collateralized debt obligation (CDO) backed by subprime mortgages. The suit claims Sachs misrepresented the expected performance of the security to its clients, who lost $1 billion on the deal, while the investment bank and a fellow hedge fund themselves were betting on the mortgages to default.

Reports today reveal that the SEC's decision to sue the Wall Street fixture was split down party lines in a 3-2 vote. According to _Reuters_, SEC Chairman Mary Schapiro sided with the two Democratic commissioners, Luis Aguilar and Elisse Walter, in deciding to pursue civil fraud charges. The two Republican commissioners, Troy Paredes and Kathleen Casey, dissented.

The partisanship reflected in the agency's assessment may be further evidence of the political motivation surrounding the charges, which have ""helped fuel Washington's push"":http://dsnews.comarticles/index/goldman-charges-fuel-push-for-stronger-wall-street-reform-2010-04-19 for stronger financial regulatory reform.

Blankfein referenced the SEC charges only briefly in the earnings release. ""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.

But Goldman Sachs is already putting together a strong defense with its deep pockets. The Wall Street firm said in a statement released Friday, ""We are disappointed that the SEC would bring this action related to a single transaction in the face of an extensive record which establishes that the accusations are unfounded in law and fact.""

The company added, ""Goldman Sachs, itself, lost more than $90 million. Our fee was $15 million. We were subject to losses and we did not structure a portfolio that was designed to lose money.""