Goldman Sachs has posted the worst slump in its profits since it went public in 1999.

Goldman's third-quarter earnings nosedived 70 per cent to $810 million, shrunk by the credit crunch, financial markets turmoil, and the evaporation of its advisory fees on corporate deals.

Goldman's investment banking division suffered a 40% fall in revenue to $1.29bn, including a 56% plunge in financial advisory fees, blamed on an industry-wide decrease in mergers and acquisitions.

Goldman's trading and principal investments division saw its revenue fall by 67 per cent to $2.7 billion, with a $500 million loss on residential mortgage-related securities and a $325 million loss on commercial mortgages. The bank's principal investments operation made a $453 million mostly because of corporate and property investments.

However, Goldman has stayed profitable; no small feat in today's choppy waters around Wall Street, and that has allowed it to fare better than competition. The company rejects suggestions that the standalone structure of Wall Street banks was under threat.

David Viniar, Goldman's CFO said that ''its not the business model, it's the performance that matters," saying that despite its share of mistakes, Goldman will protect its franchise ''at all costs."

With the landscape changing around it, and the usual names of Bear Sterns, Lehman Brothers, and Merrill Lynch disappearing from its list of competition, Viniar said Goldman's employees had "a lot of compassion" for those who lost their jobs.

However, Viniar says Goldman HAS no intentions to follow Merrill Lynch into a partnership with a bank to improve funding options. He says Goldman has more than enough access to capital it needs. Goldman's traders had correctly forecast the slump in the sub-prime mortgage industry.

Sources say that the profit decline is all but inevitable, since the collapse of the credit market and the resultant demise of deal-making would take their toll on Goldman's business. Chairman Lloyd Blankfein too, admitted that these are challenging times, with "a marked decrease in client activity and declining asset valuations."

Taking pre-emptive action against the inevitable questions about the bank's liquidity, Goldman stressed its Tier One capital ratio was at 11.6 per cent at the end of August, one of the highest in the global banking sector, with total assets of $1,080 billion. Of those, the toxic sub-prime assets represented just 6 per cent of the total, around $68 billion.

A Tier 1 capital ratio of above 8 per cent is generally considered to be a positive sign for financial institutions. The bank also said that it has global core access to $102.33 billion of liquidity, one of the highest liquidity pools in the business.