Goldman Sachs posts steep profits hike

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Investment bank Goldman Sachs today announced a pay and bonus pot of 5.49 billion dollars (£3.56 billion) as it posted a steep hike in profits for the first three months of the year.

Goldman, which is now the subject of a UK regulatory investigation in the wake of US fraud claims, said net income was 3.46 billion US dollars (£2.24 billion).

The bank said the proportion of net revenues allocated for compensation and benefits was its lowest ever for the quarter at 43%.

Goldman, which employs 5,500 people in the UK, said its performance in the first quarter of this year reflected "more signs of growth" in the economy.

The firm's results today were well ahead of expectations, with a 91% increase in profits compared to the first quarter last year. But the figure was 30% lower than the bumper 4.9 billion dollar (£3.2 billion) profits seen in the final three months of last year.

Revenues were up 36% on 2009 at 12.8 billion dollars.

The results follow a Financial Services Authority (FSA) decision to launch a "formal enforcement investigation" into Goldman in relation to Securities and Exchange Commission (SEC) allegations.

US regulators have started a civil lawsuit against the investment bank, alleging that Goldman failed to disclose that one of its clients helped create - and then bet against - sub-prime mortgage securities that Goldman sold to investors.

It claimed investors - including the Royal Bank of Scotland - lost a billion dollars (£650 million) as a result of the alleged fraud, which Goldman has vigorously denied.

The FSA said it would "be liaising closely with the SEC" in its review of Goldman.

Chief executive Lloyd Blankfein said today: "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."

Goldman's share price took a hammering after the claims were revealed last Friday, losing 12% at one point.

The fraud claims and bumper payouts have entered the political sphere in the UK, with Prime Minister Gordon Brown calling for a "special investigation" into the bank and accusing it of "moral bankruptcy".

Goldman's role as an adviser on debt issuance by the Government, as well as other issues such as the return of Northern Rock to the private sector, has also come under fire from the Liberal Democrats and Conservatives.

Meanwhile, the banker at the centre of the fraud claims, Fabrice Tourre, is reportedly set to share in the bonus pool.

Staff at the bank, which paid out 16.2 billion dollars (£10 billion) in compensation and benefits for 2009, will not receive the latest bonanza until next year.

Goldman said its compensation pot includes salaries, estimated end of year discretionary payouts, benefits and other payroll-related expenses.