Goldman profit and pay surge in blowout quarter

By Steve Eder and Joe Giannone

NEW YORK (Reuters) - Goldman Sachs Group Inc said quarterly earnings surged 33 percent on blowout trading results, trouncing forecasts and putting the bank on pace for hefty bonuses that could draw unwanted scrutiny.

The results continued Goldman's extraordinary rebound from a near meltdown of the U.S. banking industry last fall that led to a $125 billion taxpayer bailout for its largest members.

Goldman set aside $6.65 billion for salary, bonuses and benefits in the quarter, up by nearly half from the quarter ended in May last year.

That puts the average Goldman employee on pace to earn more than $900,000 this year. Chief Executive Lloyd Blankfein, senior officers and star traders will likely receive tens of millions of dollars.

The U.S. government wanted "to make sure that the banks are making money, so they do make money," said Francis Campeau, a broker at MF Global Canada in Montreal. "The flip side is now one could argue they're making too much."

Goldman reported net income for common shareholders of $2.7 billion, or $4.93 a share. That compares with $2.05 billion, or $4.58, in the quarter ended May 30, 2008, before the bank switched to a calendar-year schedule.

Analysts on average had forecast earnings of $3.49 a share, according to Reuters Estimates.

Goldman shares ended Tuesday's trade on the New York Stock Exchange up 22 cents to close at $149.66. The shares are up nearly 80 percent this year, compared with a 24 percent rise in the NYSE Arca Securities Broker/Dealer index.

The first major U.S. bank to report second-quarter results, Goldman said trading income nearly doubled from a year ago to $10.78 billion while its equity underwriting business produced record revenue of $736 million. Goldman's traders thrived in an environment of wide price swings, robust demand and fewer rivals.

"There's less competition out there," Chief Financial Officer David Viniar told reporters in a briefing.

In a subsequent interview, Viniar told Reuters he could not predict whether the firm could keep up the pace all year.

"I wouldn't tell you we will have this level of earnings every quarter," he said.

NOT OUT OF THE WOODS

The financial crisis wreaked havoc on Wall Street last year, collapsing Bear Stearns, sending Lehman Brothers into bankruptcy, and forcing Merrill Lynch into a shotgun wedding with Bank of America Corp.

Goldman's second-quarter investment banking revenue of $1.44 billion was down 15 percent from a year ago but rose 75 percent from the first quarter.