Goldman taps into Wall Street profit gusher and even Citigroup gets a lift

The good times on Wall Street rolled on this morning as earnings tripled at Goldman Sachs Group ? and even beleaguered Citigroup Inc. eked out a surprise profit.

The larger-than-life Goldman said third-quarter profit surged to $3.2 billion from $845 million a year ago. Its $5.25-per-share profit easily outdistanced the $4.18 consensus analyst estimate.

But as if to show that even mighty Goldman can disappoint, its shares pulled back as the per-share earnings fell shy of the $6 whisper number percolating through Wall Street. As of 7:30 a.m. PDT, the stock was down $2.52, or 1.3%, to $189.74.

The results also fell short of Goldman?s record $3.4-billion haul in the second quarter.

?It was a fantastic quarter, just not as fantastic as the second quarter,? David Viniar, the company?s chief financial officer, said on a conference call with reporters, according to Bloomberg News.

Goldman stowed away almost $5.4 billion for bonuses and other compensation, bringing its total so far this year to $16.7 billion. That?s just shy of the record $16.9 billion it earmarked at this point in 2007 ? very likely an intentional shortfall from a company mindful of the even greater backlash that would accompany record-breaking compensation.

Citigroup surprised Wall Street by reporting a $101-million profit ? although that was due largely to optimistic projections for reduced loan losses that had some analysts scratching their heads.

Per-share earnings fell 27 cents because of the charge associated with converting preferred shares held by the federal government into common stock.

Citigroup reported $8 billion in credit losses, down slightly from $8.4 billion in the second quarter. But it raised eyebrows by setting aside only $802 million to cover expected future losses, a big drop from its $3.9 billion second-quarter provision.

Analysts expected far more. David Trone at Fox-Pitt Kelton Cochran Caronia Waller, for example, projected a $3.1-billion provision.

The smaller reserve would be welcome news for company shareholders, taxpayers and most everyone else because it says, in effect, that the economy will improve significantly.

But if its assumptions are wrong, Citigroup runs the risk not only of far larger write-offs to come, but also of more egg on its already badly stained face.

-- Walter Hamilton