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Goldman Sachs sees losses for first time since financial crisis

October 18, 2011 |  7:21 am

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Goldman Sachs lost money in the last quarter -– the first time it has experienced a quarterly loss since the financial crisis.

Goldman, the most storied and envied Wall Street firm, saw nearly all of its revenue streams hit by the volatile markets and slowing economy. Revenue in the third quarter fell 25% from the same quarter last year, leading to net losses of $393 million, or 84 cents a share, according to financial results announced Tuesday morning. During the same quarter last year the firm had profits of $1.9 billion and $2.98 a share.

"The broader environment served as a significant headwind," the firm’s chief financial officer, David Viniar, said in a conference call. "We are clearly disappointed about our results."

Losses had been expected, but the numbers were even worse than analysts had predicted. In general, while commercial banks have been improving along with the credit profile of ordinary consumers, Wall Street firms have been suffering from the swings in the markets and the uncertain outlook for the global economy.  

The losses mark a stark reversal from the record of the last few years, when Goldman came roaring out of the financial crisis with strong results thanks to support from the government. That fueled anger toward the firm and a perception that it could find a way to profit in any circumstances. Now the firm’s vulnerability to the global economy is showing.

Goldman’s share price has been falling for much of the last year. On Tuesday, the stock rose 2.2%, or $2.17 to $99.07 in early trading. [Updated at 2 p.m. PDT: Goldman shares closed up $5.35, or 5.5%, to $102.25. They are down 39% year to date.]

The biggest losses in the quarter came from investments that Goldman has made with its own money, including a stake in a leading Chinese bank that dropped in value by over $1 billion.

In the traditional business of advising mergers and acquisitions, revenue fell 33% from the same quarter last year, while revenue from its trading division, which has grown in importance in recent years, fell 13%.

The struggles are being felt by the company’s employees. The number of employees fell by 1,300 over the last three months, while the amount of money put aside for compensation dropped 59% from a year ago and 51% from the last quarter.

--Nathaniel Popper

twitter.com/nathanielpopper

Photo: Goldman Sachs Chief Executive Officer Lloyd C. Blankfein testifies on Capitol Hill in Washington in 2009. Credit: Haraz N. Ghanbari / Associated Press

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