Goldman Sachs Group Inc quarterly earnings nearly quadrupled, topping expectations, but its shares fell on disappointment that so much of the profit came from trading gains that might not be sustainable.
The firm stayed on pace to hand out more than $20 billion in year-end bonuses.
Stellar results by rival JPMorgan Chase & Co may have prompted investors to raise the bar for Goldman, and its shares fell 2.9 percent in premarket trading.
Goldman produced great numbers but apparently didn't live up to those heightened expectations, said Peter Jankovskis, co-chief investment officer at Oakbrook Investments.
They're real earnings, the question is how repeatable are they, he said. Trading gains come and go. They're genuine earnings at the time, but its not like something you rely on quarter to quarter.
The New York-based firm posted net income in the third quarter for common shareholders of $3.03 billion, or $5.25 a share. That compares with $845 million, or $1.81 per share, in the year-earlier quarter.
Analysts on average had forecast earnings of $4.24 a share, according to Thomson Reuters I/B/E/S.
They are better than expected but there was talk of them coming in at $6, so that's why they have sold off a bit after the figures, said Arifa Sheikh-Usmani, equity trader at Spreadex.
Goldman set aside $5.4 billion for compensation during the quarter, raising the total to $16.8 billion so far this year. It is on pace to stash away more than $20 billion for its year-end bonus pool.
Goldman usually devotes about half of net revenue to compensation. In the third quarter, the proportion was 43 percent.
The firm has drawn fire from politicians and the public for setting aside so much for bonuses so soon after repaying a $10 billion taxpayer bailout.
Goldman, which has been working on burnishing its image, said it made a $200 million contribution to the Goldman Sachs Foundation, an education charity. That helped raise its non-compensation expenses 2 percent to $2.23 billion.
Net revenue in investment banking and financial advisory fell during the third quarter, reflecting the decline in mergers and acquisitions.
Investment banking net revenue was $899 million, down 31 percent from the third quarter of 2008. Results in financial advisory were $325 million, down 47 percent.
Net revenue in Fixed Income, Currency and Commodities (FICC) was $5.99 billion, up from $1.59 billion in the year-ago quarter. The increase reflects strong performances in credit products and mortgages, which were significantly higher compared to a difficult third quarter of 2008.
Net revenue in equities was up 78 percent to $2.78 billion, helped by a strong performance in derivatives and shares.
Principal Investments posted net revenue of $1.26 billion after a $453 million loss in the year-ago quarter.
Goldman recorded gains in corporate principal investments and its investment in Industrial and Commercial Bank of China Ltd, but posted a loss of $66 million from real estate principal investments.
Through Wednesday, Goldman shares were up more than 300 percent from lows set last November. (Reporting by Steve Eder and Paritosh Bansal; editing by John Wallace)