Goldman Sachs has profit of $3.4 billion in 2nd quarter
NEW YORK -- On Tuesday, the Wall Street bank reported a 65% increase in second-quarter earnings to $3.4 billion, as revenue jumped 46% to a record $13.8 billion.
"This environment is not conducive to straightforward solutions, and our culture of innovation and nimbleness allows us to react quickly," said David Viniar, Goldman's CFO, in a conference call with analysts.
With decreased competition from the demise of Lehman Bros. and Bear Stearns, Goldman's trading desks have been busy, leading to record revenue from fixed-income, currency and commodity trading totaling $6.8 billion. Goldman shares rose just 22 cents to $149.66 Tuesday but are up 78% this year.
"There are fewer players, and competitors like Morgan Stanley have pulled back on risk-taking, which benefits Goldman," says Ben Wallace, securities analyst at Grimes & Co.
Goldman's solid reputation has also helped its capital markets performance. As the credit markets thawed and stock prices rose in the second quarter, corporations rushed to issue stock to raise financing, many using Goldman as an underwriter. Goldman's revenue from stock underwriting set a quarterly record of $736 million and stock trading generated $3.2 billion.
"Goldman is a beneficiary of the market disruptions of 2008. ... (It is) able to aggressively seek share gains while competitors continue to be distracted with integrating acquisitions or simply remain more risk-averse," says Steve Stelmach, an analyst at Friedman Billings Ramsey.
Traditionally one of the highest-paying Wall Street firms, Goldman is expected to give its employees fat pay packages this year to reward them for performance. In the quarter, it set aside $6.7 billion for compensation and benefits, up 47% from last year, for its 29,400 employees.
However, Goldman last fall was among the large banks that took government bailout money, receiving $10 billion. Though it has paid the amount back with interest, Goldman could find itself vulnerable to criticism about any perceived excesses.
