Goldman posts $2.1B in earnings

— -- Proving that Wall Street has not gone completely awry — at least not yet — investment bank Goldman Sachs GS on Tuesday reported earnings of $2.05 billion for its second quarter.

While that was a 10% decline from the previous second quarter's net, it exceeded analysts' expectations and demonstrated that it's still possible for investment banks to make money in troubled times.

"Given the difficult market conditions, we are particularly pleased to be able to report strong results for the second quarter," CEO Lloyd Blankfein said in a statement. "We are realistic about the market challenges we face, but times of market dislocation also produce opportunities, and we will continue to take advantage of the most attractive of these as they arise."

Goldman Chief Financial Officer David Viniar said the company will continue to navigate through a credit crisis that has hurt some of its competitors and caused the near-collapse of Bear Stearns.

"We're a ways through what has happened," he told reporters. "I think there is a lot of the crisis behind us, and that means there's less to come than there was."

In recent months, Wall Street has been battered by the severe downturn in the credit markets, a direct consequence of last year's bursting of the real estate bubble.

Just last week, rival investment bank Lehman Bros. leh announced it would lose $2.8 billion for the quarter. The firm also raised $6 billion in new capital to allay concerns that it might become the next Bear Stearns. The news contributed to a widespread sell-off of financial services stocks and eventually led to the ouster of Lehman's CFO and chief operating officer.

Goldman's earnings were driven by strong performances in proprietary trading and "principal investments" in companies. Investment banking results were mixed: Revenue from advisory services grew, but revenue from debt underwriting fell, reflecting a sharp reduction in merger-and-acquisition activity in the USA and abroad.

"This is a very impressive quarter on revenues, expenses and risk management," wrote Deutsche Bank analyst Mike Mayo, who has a "buy" rating on the bank.

"The key with Goldman Sachs is you've got to split the company into two parts," says Richard Bove of Ladenburg Thalmann. "There's the operating company and the hedge fund part, also known as the investments. Investments did extremely well in the quarter, and that's where the earnings came from. The operating side didn't do that well, outside of equities."

Goldman Sachs shares dropped $2.65 to $179.44 Tuesday amid a broad market sell-off. The stock had rallied three trading days in a row going into the earnings report.

Contributing: The Associated Press