The old Goldman Sachs is backJanuary 16, 2013: 8:17 AM ET
The bank took in nearly $6 billion from proprietary trading in 2012, even as more plain-vanilla lending revenue continues to grow.
FORTUNE -- Here comes the new Goldman Sachs. And it looks a little bit like the old Goldman Sachs.
Goldman (GS) said Wednesday morning that it earned nearly $2.9 billion in the last three months of 2012, more than $1 billion more than analysts were expecting. Earnings per share more than tripled from a year ago to $5.60, which was also a lot more than analysts were expecting. For all of 2012, Goldman said it earned $7.2 billion, up from $2.5 billion a year earlier. The stock rose nearly 2% in pre-market trading.
The earnings also showed the beginnings of a shift at the firm. In the past year or so, Goldman, forced by new regulations to retreat from some of its trading businesses, has been trying to beef up its lending operations. That move paid off in 2012. Revenue from lending rose to $1.8 billion in 2012, from less than $100 million a year ago. That was much better than Goldman did in its traditional businesses. Revenue from investment banking and investment management were basically flat from a year ago.
But the move into lending, at a time when interest rates are at historic lows, comes with its own risks. The money Goldman made from interest payments dropped nearly $2 billion from the fourth quarter of 2012.
But there were also signs of the old Goldman as well. The company had $5.9 billion in revenue from so-called principal transactions, which are trades Goldman made for its own account. Much of that revenue could be going away soon though. Regulations passed after the financial crisis are expected to ban Goldman and other banks from making risky trades with its own money. The regulations are not expected to fully go into effect for at least another year.
It looks like Goldman is paying heftier bonuses again as well. Overall compensation was up 6% to just under $13 billion. That works out to $399,506 per employee. That's up from about $367,000 per employee in 2011. The company also reduced its headcount by 200 staffers in the fourth quarter.
Goldman also was remarkably more profitable in the quarter. The company said its return on equity, a closely watched metric for banks, rose to 16.5%. That number, which was regularly around 20% for Goldman before the financial crisis, had shrunk to the single digits in early 2012.
"While economic conditions remained challenging for much of last year, the strengths of our business model and client franchise, coupled with our focus on disciplined management, delivered solid performance for our shareholders," said Goldman's CEO Lloyd Blankfein in a statement released with the earnings. "The firm's strategic position provides a solid basis on which to grow and generate superior returns."
Goldman's report came on the same day that rival JPMorgan Chase (JPM) also reported better-than-expected earnings -- and that CEO Jamie Dimon had his bonus cut due to the London Whale losses. JPMorgan's stock was slightly lower in pre-market trading. Bank of America (BAC) and Citigroup (C) are on tap to report results on Thursday. Morgan Stanley (MS) will wrap up the round of big bank earnings on Friday. Wells Fargo (WFC) posted healthy results last week but investors were worried about a drop in mortgage refinancing activity.