The extent of Wall Street fears about the credit crunch was underlined further yesterday as the market celebrated the fact that Goldman Sachs, the most reputable of the securities firms, announced that its profit fell by only 53 per cent in the first quarter.

Goldman’s shares jumped by 16 per cent to close at $175.59 after the group announced about $2.5 billion of write-downs relating to so-called leveraged loans that finance private equity deals, mortgages and direct investments in companies.

These losses, together with the constraints put on the business by the credit crunch, fed through into profit declines in deal advisory work, debt and equity underwriting, trading and principal investments.

Michael Holland, the founder of Holland & Co, a money manager, said, as the group reported a 35 per cent decline in revenue to $8.34 billion: “Goldman Sachs once again shines in difficult times. This was a stellar report.” Net income for the period fell from $3.2 billion to $1.51 billion, or $3.23 a share. This was ahead of the consensus analyst forecast of $2.57 a share.

Goldman Sachs recorded about $1 billion of losses on mortgage loans and securities and $1 billion of write-downs on leveraged loans. It recorded a loss of $532 million on its portfolio of direct investments as its stakes in Industrial and Commercial Bank of China and other corporate investments fell in value.

The investment banking division’s revenues fell by 32 per cent to $1.17 billion, as financial advisory, equity underwriting and debt underwriting revenues declined.

The trading and principal investments division’s revenues fell by 46 per cent to $5.1 billion, dragged down by a 32 per cent drop in fixed income, currency and commodities trading. The unit was further depressed by a decline in equities trading revenue and the $532 million loss on its direct investments.

However, the bank’s asset management division reported a 28 per cent rise in revenues, in part because of a rise in management fees.

Lloyd Blankfein, the Goldman Sachs chief executive, said: “Market conditions are very difficult. We saw strong customer activity across many of our franchise businesses in the first quarter.”

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