Goldman Sachs heads the field

GOLDMAN SACHS, the privately-held investment bank, has emerged as Wall Street's most consistently profitable securities firm, earning dollars 1.15bn (pounds 672m) before taxes last year alone.

Details of the firm's closely- guarded profit-and-loss account were revealed in a non-public filing made last week with the US Securities and Exchange Commission to support a dollars 200m issue of debt securities.

Separately it emerged that the Goldman European operations, based in London, contributed about a quarter of the total profit - approaching pounds 170m - making it one of the most profitable merchant banking businesses in the City.

The US filing also showed that Goldman made dollars 662m in the first half of this year - mostly through securities trading, rather than underwriting, as was widely assumed - setting the stage for another year of record profits.

While other Wall Street firms have rung up bigger profits, Goldman has shown consistent strong growth throughout the five years of results contained in the filing, making 25 per cent more during the period than its closest rivals, Morgan Stanley and Salomon Brothers.

Even in 1987 and 1989, when Wall Street crashed, the firm made more than dollars 600m, and in 1990 - a year that saw widespread layoffs in the securities business - Goldman made dollars 886m. And while Merrill Lynch made almost as much in 1991, it did so on revenues of dollars 7.26bn, compared with Goldman's dollars 3.26bn turnover.

The filing also ranks Goldman second behind Merrill in capital, with slightly over dollars 4bn. Partners' capital accounted for dollars 3.3bn of that at the end of May, a rise of 27 per cent over the previous year.

Of Goldman's 6,750 employees, 142 are partners. A portion of their profits each year is ploughed back into the firm's capital pool.

The remaining dollars 750m in capital is owned by Sumitomo Bank Capital and Kamehameha Schools, an estate trust.

At the end of May, according to the offering, Goldman's total assets stood at dollars 77.1bn, 11 per cent higher than the year before. The filing also detailed some of Goldman's 59 principal investments, which have a reported worth of dollars 241m.

Goldman Sachs refused to comment on reports of the filings, which were detailed in the trade journal, Investment Dealers' Digest. But a spokesman for the firm would not challenge any of the figures cited, and noted that the IDD's report included a photograph of the filing it had obtained.

While the filing did not include compensation packages for either senior executives or partners, many are known to make more than dollars 5m a year including their share of Goldman's annual profits.

The firm is currently reviewing candidates for new partner positions, a highly competitive review that takes place every two years.

Analysts agreed that Goldman's performance exceeded their estimates, and demonstrated that the firm is 'undeniably the strongest shop on the street', as one said.

But they noted that Goldman relies on trading for a higher portion of its profits than had been believed, and they said its results were more vulnerable to future downturns in the markets.