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Lower Revenues Trump Dividend Boost for Goldman Sachs

Paul Ausick

Goldman Sachs Group Inc. (GS) reported third-quarter 2013 results before markets opened Thursday morning. The investment bank and financial services giant posted quarterly diluted earnings per share (EPS) of $2.88 on revenue of $6.72 billion. In the same period a year ago, Goldman reported EPS of $2.85 on revenue of $8.35 billion. Third-quarter results also compare to the consensus estimates for EPS of $2.43 on revenue of $7.36 billion.

Revenues dipped sharply sequentially, from $8.61 billion in the prior quarter this year. Compared with the second quarter, the investment banking segment's revenues were down 25%, although they were flat year-over-year. Underwriting rose 13% year-over-year but fell 30% sequentially. Total revenues fell 22% sequentially and 20% year-over-year.

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The bank boosted its dividend from $0.50 to $0.55. Its dividend yield before the hike was 1.3%.

The bank's CEO said:

The third quarter's results reflected a period of slow client activity. Still, we saw various signs that our clients are prepared to act on significant transactions and we believe that the firm is well positioned to help our clients accomplish their objectives. As longer term U.S. budget issues are resolved, we could see an improvement in corporate and investor sentiment that would help lay the basis for a more sustained recovery.

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Goldman's Basel I Tier 1 capital ratio rose sequentially from 15.6% to 16.3% at the end of the third quarter. The Tier 1 common ratio also rose, from 13.5% at the end of the second quarter to 14.2% at the end of the third quarter.

Net assets under supervision rose by $16 billion, a significant increase from net outflows of $4 billion in the second quarter and $9 billion in the first quarter. Total assets under supervision reached $991 billion, a record for the bank.

Shares were trading down about 2.4% in the premarket Thursday morning, at $158.25 in a 52-week range of $113.84 to $170.00. Thomson Reuters had a consensus analyst price target of around $164.30 before the results were announced.

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