NEW YORK (Bloomberg) — Goldman Sachs Group Inc., buoyed by better-than-expected earnings and a 54 percent gain in its stock price, raised $5 billion in a share sale to help repay $10 billion in government rescue funds.

The bank said yesterday it sold 40.65 million shares at $123 each, 5.5 percent less than yesterday's closing price of $130.15. The price was exactly the same level at which the bank last sold shares in September. Until last week, the shares hadn't closed above $123 since October 6.

Chief executive officer Lloyd Blankfein, 54, wants to refund money received from the US Treasury's Troubled Asset Relief Programme in October to run his bank, which set a Wall Street pay record in 2007, without any limits on compensation. The bank announced the share sale as it unveiled first-quarter profit that exceeded the most optimistic Wall Street estimates.

"There are a lot of banks looking to raise money right now and Goldman has put itself at the head of the queue," said Richard Staite, a London-based analyst at Atlantic Equities LLP who rates the stock "neutral". Repaying TARP money "frees them up to retain talented staff with better compensation".

Even after repaying the funds, Goldman Sachs intends to take advantage of government help by continuing to sell low-interest debt backed by the Federal Deposit Insurance Corp., chief financial officer David Viniar said on a conference call yesterday. "As far as we know they're not tied together — there are participants in the FDIC-guaranteed programme that do not have TARP capital today," he said. "We still have some capacity under the FDIC guarantee at pretty attractive spreads."

The 5.5 percent discount of the new stock to Tuesday's closing price is more than triple the 1.6 percent discount at which the bank sold $5.75 billion of common stock in September.

Goldman Sachs, the most profitable Wall Street firm before it converted to a bank last year and posted its first quarterly loss since going public in 1999, said yesterday it earned $1.81 billion, or $3.39 a share, in the first quarter as a surge in trading revenue outweighed asset write-downs. The result beat the $1.64 estimate of 16 analysts surveyed by Bloomberg.

"I'm a little nervous for the industry in that that's a one-off phenomenon," said Peter Fisher, managing director and co-head of fixed-income at BlackRoock Inc., referring to the trading gains. "There are some one-off effects going through the quarter."

Viniar said yesterday that profit resulting from American International Group Inc. payments to the firm "rounded to zero" in the first quarter. Most of the cash flow from AIG payments took place prior to the end of the year, he said.

After AIG was rescued by the US from collapse last year, banks that bought credit-default swaps got $22.4 billion in collateral and $27.1 billion in payments to retire the contracts, the insurer said last month. Lawmakers have called for a federal probe into whether banks including Goldman Sachs received more funds than necessary from the bailout.

If Goldman Sachs returns the TARP money, it may pressure other banks to follow suit or risk appearing dependent on the government, said Brad Hintz, an analyst at Sanford C. Bernstein & Co. in New York. "The right thing for government officials to do will be to delay the GS repayment until a significant group of banks are able to repay simultaneously under some organised plan," Hintz said.