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Earnings up 83% at Goldman Sachs

NEW YORK — While the stock market may be flat for the year and bonds remain volatile, Wall Street firm Goldman Sachs had no problem finding ways to make money as it posted an 83 percent surge in quarterly earnings Tuesday.

The company's record revenues, net income and earnings-per-share illustrated Wall Street brokerage houses' increasing diversity in recent years. Stocks and bonds have been supplemented by trading mortgages, credit products, commodities like oil and metals and currency.

And while most U.S. investors are invested in domestic stocks and bonds, Goldman Sachs and its rivals are increasingly international in scope and focus.

"These guys are global companies. Goldman has half its revenues come from outside the U.S.," said David Trone, senior vice president and analyst with Fox-Pitt Kelton. "They can find profits wherever they need to."

For the quarter ended Aug. 26, Goldman Sachs saw profits applicable to common shareholders of $1.61 billion, or $3.25 per share, up from $879 million, or $1.74 per share, in the fiscal third quarter of 2004.

Net revenues rose 61 percent to $7.29 billion, up from $4.53 billion in the year-ago quarter.

Analysts surveyed by Thomson Financial had forecast earnings of $2.38 per share on revenues of $5.77 billion.

"Our businesses are quite diverse, and there's no single item that would make or break us," said David Viniar, Goldman's chief financial officer, in a conference call with analysts. "This was a broad-based gain, with every major business contributing."

Shares of Goldman Sachs fell 23 cents to close at $118.05 Tuesday on the New York Stock Exchange. The stock has traded in a 52-week range of $90.74 to $118.62.

Fixed income, currencies and commodities trading accounted for more than a third of Goldman's total revenues, climbing 41 percent from a year ago to $2.63 billion. Equity trading and commission revenues jumped 75 percent to $1.59 billion.

Rising interest rates could eat into these gains in the coming months as the Federal Reserve continues to increase interest rates. The Fed raised the nation's benchmark interest rate by a quarter percentage point to 3.75 percent on Tuesday. That could make it more difficult for brokerages like Goldman to make money on credit products and mortgage trading.

However, Trone said the bond and credit markets have been surprisingly resilient to increased interest rates, which has generally worked in the brokerage houses' favor.

"The rate increases have been going on for quite some time, and it really hasn't had an impact," Trone said. "And in the case of Goldman, you still have sustainable core revenues up very strong."