Goldman Sachs posts worst quarter since going public; profit down 71%

NEW YORK -- The world's largest investment bank reported third-quarter profit plunged 71% from the year-ago period, an almost unthinkable drop for a firm widely described as the smartest on Wall Street. Goldman's results reflect continuing damage from the ongoing credit crisis that has already vanquished three of its rivals.

Goldman and Morgan Stanley remain the only major independent investment banks on Wall Street after a major shake-up of the investment banking industry. Lehman Brothers Holdings filed for bankruptcy Monday after succumbing to distressed real estate holdings, while Bear Stearns and Merrill Lynch were swallowed by commercial banks in emergency sales.

After two years of record profits, Chairman and Chief Executive Lloyd Blankfein has been the only CEO to navigate his firm through the market dislocation without posting a loss or major write-downs. He said "this was a challenging quarter" marred by a "decrease in client activity and declining asset valuations."

That was reflected in the numbers. The New York-based investment bank posted a profit of $810 million, or $1.81 a share, after paying preferred dividends compared to $2.81 billion, or $6.13 a share, a year earlier. Revenue for the three months ended Aug. 29 skidded 51% to $6.04 billion from $12.3 billion a year ago.

The results still beat Wall Street projections for $1.71 a share, according to analysts polled by Thomson Reuters. Revenue fell short of the $6.23 billion expected by analysts.

The financial market turmoil is certainly one of the low points in Goldman's 139-year history. Though it has avoided the kind of bruising results turned in by many of its rivals, Goldman's shares are still down almost 50% from its 52-week high of $250.70.

On Tuesday, the stock tumbled $7.60, or 5.6%, to $127.90 in morning trading after sinking to a new 52-week low of $116 earlier in the session.