Goldman breaks annual profit record with three months left

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Goldman Sachs has revealed that it has already made more in 2006 than any Wall Street rival has managed in a year.

At almost $6.4bn (£3.4bn), net earnings during the nine months to the end of August exceeded the $5.6bn the bank made throughout 2005, itself a record year.

Despite thelull between June and August, Goldman underscored its position as the leading adviser on mergers, acquisitions and equity underwriting. During this time, it advised the steel maker Mittal Steel on its $44bn acquisition of the Luxembourg-based rival Arcelor, and several big private-equity deals.

Net revenues of $1.29bn from investment banking in the third quarter of Goldman's financial year were 27 per cent higher than during the same period last year and exceeded analysts' expectations.

Lloyd Blankfein, Goldman's chairman and chief executive, said: "We are pleased to be reporting our third-best revenue quarter in our history. This is particularly noteworthy given our record performance for the first half of the year."

Mr Blankfein accepted that the US economy had slowed, but said the global economy was doing better and that companies still had a healthy appetite for deals. "Markets are showing more hesitancy than the companies," added Mr Blankfein.

Revenues from the bank's trading and principal investment division eased 7 per cent in the third quarter amid investor uncertainty and a slow July and August. Net revenues were almost a third lower than during the same period last year.

In April, it emerged that Hank Paulson, Mr Blankfein's predecessor as Goldman's chairman and chief executive, had ordered senior bankers in London to stop using its own money to finance hostile bids after a backlash against its role in a series of British offers.

In the preceding weeks, Goldman had either walked away from or been rebuffed on four takeover bids, for targets including ITV, Mitchells & Butlers and Associated British Ports. Mr Paulson, concerned for the bank's reputation, told his bankers that such moves threatened the bank's standing with clients, which he said was more important than profits from any single deal. He has since been succeeded by Mr Blankfein, who hails from a trading rather than an investment banking background.

City analysts applauded yesterday's quarterly results. Goldman shares, which have lagged the S&P 500 index by about 4 per cent between June and August, were about $3 higher at about $154 in early trading on Wall Street.