Goldman Sachs reports record $2.5bn profits

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The investment banking giant's first-quarter earnings were more than 40 per cent higher than estimates, sending the company's shares to record highs. And employees across the group salivated at the swelling bonus pool. Goldman set aside $5.3bn (£3bn) for staff compensation in the three months to 28 February, 66 per cent more than the same period last year.

The performance was driven mainly by Goldman's bond, commodities and foreign exchange trading. But there was also a record performance for the asset management business, and the investment bank had its best performance since the peak of the bubble.

Hank Paulson, the chief executive, said: "Nearly all our businesses produced record or near-record performances results.... We see attractive opportunities and high levels of client activity."

The results confirmed that boom times are back on Wall Street. Although Goldman executives said its backlog of deals in progress had shrunk, it was still significantly higher than last year.

Goldman shares touched record highs in early trading as fund managers predicted the company would sustain its strong start to the year. Sandy Lincoln, at Wayne Hummer Investments, said: "We think the backlog of initial public offerings is strong and corporate balance sheets are flush with cash, which speaks well for merger and acquisition activity."

In the first quarter, Goldman retained its position at No 1 in the league table of advisers on M&A and flotations.

Across the group, net income was up 62 per cent to $2.48bn; net revenues were a record $10.34bn. The earnings-per-share of $5.41 compared with Wall Street expectations of $3.29. Most of the outperformance came from the trading division.