Goldman Sachs, which made a successful $4 billion (£2 billion) bet that the US sub-prime mortgage market would spark chaos, beat expectations today on both fourth-quarter and annual profits.

For the three months to November 30, the US investment bank reported profits up from $2.8 billion to $3.1 billion on revenues ahead by 14 per cent to $10.7 billion.

For the full year, pre-tax profits rose 21 per cent to $17.6 billion and net earnings were up 21 per cent to $11.4 billion.

Revenues rose 22 per cent to $45.9 billion.

The investment bank has set aside $20.1 billion for compensation and benefits, with $18.8 billion understood to be allocated for bonuses. Total compensation and benefits rose 23 per cent.

A spokesman for Goldman Sachs declined to comment on the final bonus figure.

Lloyd Blankfein, the chairman and chief executive of Goldman Sachs, who is understood to be in line for a 30 per cent pay rise to $70 million, said: "Looking forward, we continue to see significant growth opportunities across the global economy."

Although the investment bank said that revenues from credit products had declined in the fourth quarter and the full year, it was upbeat about future trading.

It emerged last week that three Goldman Sachs traders had reaped $4 billion on a bet that the value of US sub-prime mortgages would decline.

Revenues from its trading and principal investments jumped 22 per cent compared with a year ago to $31.23 billion with "significantly higher" income made in currency and interest rate trading.

Revenues from investment banking jumped 34 per cent to $7.56 billion and financial advisory income rose 64 per cent to $4.22 billion.

Octavio Marenzi, chief executive of Celent, a Boston-based financial research and consulting firm, said: "If Goldman had been able to grow primarily based on short positions in the mortgage market, it would be the result of taking a large, risky bet.

"However, this is not the case. Goldman ratcheted up record results in every line of business. It is difficult to look at these results and not feel a certain sense of awe at what Goldman has achieved this year.

"Goldman's results stand head-and-shoulders above its competitors, many of whom have struggled with the difficulties in the mortgage market this past year. Goldman took that weakness and turned it to its own advantage.”

Morgan Stanley and Bear Stearns report results later this week.

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