Goldman earnings fall on fixed income slide Goldman Sachs enjoyed a strong performance in equity underwriting but endured its worst year for fixed income trading since 2005 as overall profits fell 19 per cent to $2.3bn. Initial public offerings, including Twitter, helped Goldman boast its revenues for equity underwriting in the fourth quarter were "more than double" last year's at $622m. In a sign of confidence in the persistence of the nascent mini-boom in mergers and acquisitions and equity offerings, Goldman said its investment banking backlog of potential deals had "increased significantly" compared with the end of 2012. But fixed income trading - a more important source of revenue - fell 15 per cent in the quarter and the $8.6bn in annual revenues were the worst in eight years, with Goldman making more than $9bn a year even during the crisis year of 2008. The bank highlighted, in particular, "significantly lower revenues in mortgages." Overall revenue of $8.8bn in the fourth quarter was 5 per cent lower than the same period last year. Earnings per share of $4.60 were down 18 per cent but ahead of analysts" forecasts of about $4.18. After preferred dividends, net income fell 21 per cent to $2.2bn. Struggling to raise its return on equity, Goldman cut its bankers" bonuses, with the payroll falling 3 per cent to $12.6bn to make a ratio of pay to revenues of 36.9 per cent, a percentage point lower than at the end of 2012. Return on equity was 12.7 per cent in the fourth quarter - beating JPMorgan Chase and more than twice as high as at Bank of America - but still below the bank's historic levels of profitability. "Our work in advancing our client franchise and in ensuring continued cost discipline has allowed us to provide solid returns even in a somewhat challenging environment," said Lloyd Blankfein, chief executive. We believe that we are well positioned to generate solid returns as the economy continues to heal and provide considerable upside for our shareholders as conditions materially improve. Goldman's shares fell 1.2 per cent to $176.62 in early trading. They are up just under 30 per cent over 12 months but that is about half the improvement of rival Morgan Stanley's stock. Revenues in its investing and lending division, which invests the bank own funds, rose 4 per cent to $2.1bn in the quarter. Some analysts believe the division will be challenged by new rules, such as the Volcker rule, which seeks to restrict banks" principal transactions. The investment management division, which invests on behalf of clients, saw revenues rise 4 per cent to $1.6bn.