Goldman Sachs Group Inc said quarterly earnings surged 33 percent on blowout trading results, trouncing expectations and putting the bank on pace for outsized bonuses that could draw more unwanted public scrutiny.

The results continued Goldman's extraordinary rebound from the near meltdown of the U.S. banking industry last fall.

Just nine months after the U.S. Treasury bailed out the nation's largest banks with $125 billion of taxpayer money, Wall Street's biggest surviving securities firm topped forecasts as improving markets fueled trading profits.

Goldman also blew the lid off compensation. It 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 were fractionally lower in afternoon trade after rising 5.3 percent on Monday. The shares are up nearly 80 percent this year, compared with a 24 percent rise in the NYSE Arca Securities Broker/Dealer index.

Goldman, the first major U.S. bank to report second-quarter results, said trading income nearly doubled from a year ago, 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. It is very hard to know how the company will perform over the rest of the year.

In a conference call with analysts, he elaborated: The environment is still a very tricky environment ... We're 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.

They look like a blowout to me, but I don't think it should be a big surprise to anyone, said Keith Davis, an analyst at Farr, Miller & Washington. The environment is very conducive to the type of things they do. Spreads are very wide, fixed-income and equity issuances have been pretty strong.

William Smith, chief executive of Smith Asset Management, said, Things are very fragile, but they manage to make money in all environments, which is what you're supposed to do.

Goldman has come under fire for its government connections and fat-cat profits, seemingly sailing through a deep recession shortly after accepting $10 billion of taxpayer bailout money and benefiting from a host of other government programs.

The bank incurred a one-time $426 million charge in the second quarter related to repaying the government. Viniar said there was no timeline for buying back stock warrants issued to the government under the Troubled Asset Relief Program, or TARP.

He did not comment on how the government's intervention impacted Goldman, observing only that the firm is not immune to public sentiment. The bank has been under fire from lawmakers and public advocates, including a highly caustic cover story recently in pop culture magazine Rolling Stone.

We know it. We see it. We don't like it, Viniar said. We believe we are doing good things. We are helping the economy recover. I don't like reading bad things about Goldman Sachs.

(Writing by Joseph A. Giannone; Reporting by Steve Eder, Elinor Comlay, Juan Lagorio and Jonathan Spicer; editing by John Wallace)