Goldman Traders Had a Perfect Quarter

The Wall Street Journal

Goldman Sachs Group Inc. (NYSE: GS - News) traders didn't lose any money at the end of each trading day during the first quarter, a first for the Wall Street firm, which typically loses funds on at least a handful of days in the period.

Traders raked in more than $100 million daily for 35 days and made no less than $25 million daily during the rest of the three-month period, according to a regulatory filing.
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The trading results during the first quarter handily beat results from longtime rival Morgan Stanley (NYSE: MS - News), which said it lost as much as $30 million daily on four days during the quarter. Morgan Stanley made between $60 million and $90 million on each of 16 days during the quarter, and between $210 million and $240 million on one day.

The Goldman results are for the three months ended March 31. In mid-April, the SEC filed civil securities-fraud charges against the firm and a trader in its mortgage group, accusing Goldman of failing to make certain disclosures on a 2007 investment vehicle that allowed participants to bet on the mortgage market. In the wake of this suit, The Wall Street Journal reported that Goldman is also the subject of a federal criminal probe.

Goldman and the trader say they have done nothing wrong and are fighting the civil charges.

Goldman warned on Monday that future litigation costs could cut into profits. "We are involved in a number of judicial, regulatory and arbitration proceedings concerning matters arising in connection with the conduct of our businesses," the company said in an SEC filing. "Given the range of litigation and investigations under way, our litigation expenses can be expected to remain high."

Analysts have estimated that a settlement of the SEC's current complaint could range between $1 billion and $5 billion. Goldman said that the challenges wouldn't be material to the overall business but that legal costs and potential settlements could trim operating results. The company spent about $500 million on legal costs in 2009.

Goldman's stock has dropped 22% since the charges were filed, wiping out more than $20 billion in shareholder value. The firm also said in the regulatory filing that it received letters from investors "demanding the board take action to address alleged misconduct," along with a number of class-action lawsuits.

Lloyd C. Blankfein, Goldman's chairman and chief executive, said during Friday's annual meeting that the investment bank will look into ways the company can confront the current scrutiny over its business practices.

"The last few weeks have been ... difficult and disappointing," Mr. Blankfein told shareholders. "Questions have been raised that have gone to the heart of our most fundamental value: how we treat our clients."

-- Brett Philbin contributed to this article.

Write to Joe Bel Bruno at joe.belbruno@dowjones.com

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