Goldman sachs profit up 33 pct, tops estimates

inspector_monkfish

14:05 14Jul09 Goldman profit up 33 pct, tops estimates
* TARP repayment brings $426 million charge
* Trading revenue nearly doubles
* Shares fall slightly in premarket trading



NEW YORK, July 14 - Goldman Sachs Group Inc <GS.N> reported a 33 percent rise in quarterly earnings Tuesday on strong trading results, continuing an extraordinary rebound from the near meltdown of the U.S. financial sector last fall.

The results for Wall Street's largest surviving investment bank topped analysts' estimates, bolstered by improving markets and an upswing in advisory fees.

Goldman reported net income for common shareholders of $2.7 billion, or $4.93 a share, compared with $2.05 billion, or $4.58 a share, in the quarter ended May 30, 2008, when the bank had a different reporting schedule.

Analysts polled by Reuters Estimates had forecast, on average, $3.49 a share. Analysts polled by First Call had forecast $3.54.

Goldman shares were fractional lower in premarket trading.
Goldman, the first major U.S. bank to report second-quarter earnings, said trading income jumped 93 percent from a year ago, while its equity underwriting business produced record revenue of $736 million.

Investment banking revenue of $1.44 billion was down 15 percent from a year ago but rose 75 percent from the 2009 first quarter.
Keith Davis, an analyst at Farr, Miller & Washington, said the results appeared to be strong.

"They look like a blowout to me, but I don't think it should be a big surprise to anyone," Davis said. "The environment is very conducive to the type of things they do. Spreads are very wide, fixed income and equity issuances have been pretty strong."

William Smith, chief executive of Smith Asset Management, said, "Things are very fragile but they manage to make money in all environments, which is what you're supposed to do."

With Goldman facing a string of publicity of late, Smith said the bank should be applauded for its performance.

"Goldman should be celebrated, not demonized," he said.
Second-quarter gains were tempered by a one-time $426 million charge related to Goldman's repayment of $10 billion in loans from the U.S. Treasury's Troubled Asset Relief Program, known as TARP.

The company set aside $6.65 billion for compensation in the quarter. The Obama administration is focused on curbing compensation in the banking industry.

Conrad

SPREADS ARE WIDE

Wide spreads is the spice to bring back investors into lending.

Wealth funds are circling these legs, errr spreads.
Most people in the UK wont be repossessed, yet the spreads are high - thats a heady combination as confidence returns.

Melton Building Society and others have latched onto this and are charging mortgages out at 7.5% - that's damned profitable especially as they limit thier exposure to 70% max.

Alan_M_2

Silly Laymans question......

With the world economy on it's knees where exactly has all this cash (profit) come from?

Mr_Mumble

Alan M, mainly fixed interest. Goldman is a big player in the issuance and insurance of government securities - government debt is a huge growth market at the mo! Goldman also benefits more than anyone from Lehman and Bear Stearns going under, its sucking up most of the investment banking business. It'll also benefit from accountancy rule changes in the last couple of months (see Whitney vid).

Meredith Whitney yesterday on why Goldman (and other banks) were going to have a huge quarter

Charlie Gasparino on Goldman and why it should be reigned in (its Value at Risk is getting back to 'dangerous' levels).

FT - Goldman’s getting riskier

Revenue from fixed-income, currencies and commodities, the company’s biggest unit, was a record $6.8 billion in the second quarter, which compared with $6.56 billion in the first quarter and $2.38 billion in last year’s second quarter.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a2jo3RK2_Aps

inspector_monkfish

Alan_M wrote: »

Silly Laymans question......

With the world economy on it's knees where exactly has all this cash (profit) come from?

m@fia.....

Cannon_Fodder

Alan_M wrote: »

Silly Laymans question......

With the world economy on it's knees where exactly has all this cash (profit) come from?

Being given $10 billion helped...

Thrugelmir

Alan_M wrote: »

Silly Laymans question......

With the world economy on it's knees where exactly has all this cash (profit) come from?

Primarily other banks, insurance companies or hedge funds. As somebody would taken a corresponding loss on the other side of the deal.

sabretoothtigger

inspector_monkfish wrote: »

m@fia.....

government m a f i a (is a banned word !!!!!!) or the rise of economic fascism according to some, which sounds similar to chinese ideas of business and they do very well I guess

Bear Stearns going under

bs operates under jpm


Wells fargo will be more interesting. This is the company buffet said he would buy 100% if he was able but its also declared a sell by Ms whitney who backed GS

Fella

Warren Buffett is a smart cookie.

sabretoothtigger

He tipped the banks last nov while the world was apparently ending, said they would do good business on better spreads then ever before

Now I think about it, he does own gs pref stocks I think, bought at 120?

Alan_M_2

Well I appreciate the efforts of explanations but I have to admit this goes over my head.

I simply can't comprehend why they need any form of financial assistance and then manage to produce figures of this magnitude.

Call me sceptic but I wouldn't be surprised in a generation to find this all some monumental Madof like Ponzi scheme.