Goldman Sachs Profits Soar

Goldman Sachs (GS) reported its 2Q09 results this morning. Net income for the quarter at $2.7 billion, or $4.93 per share, (up from $2.05 billion, or $4.58 per share, during 2Q08), was way ahead of consensus estimates of $3.49 per share.

The results demonstrate a very strong performance in its trading operations, partly offset by a one-time $426 million charge related to the repayment of $10 billion of TARP money.

As credit spreads have continued to narrow, the fixed income, currency and commodities trading segment's revenue more than doubled to $6.8 billion. Equity underwriting revenues also soared, as many banks raised money to shore up their capital levels and repay TARP money during the last quarter.

Goldman’s trading revenues have also been helped by the falling off of competition, which has led to increases in its market share. It has also been able to increase its fees.

On the other hand, Investment-banking revenue fell 15% as financial-advisory revenue dropped 54% on a decline in mergers and acquisitions.

Goldman’s results bolster the belief that the condition of financial markets is stabilizing now, though the overall economy continues to be very weak.

With the positive surprise from Goldman, the market’s focus has now shifted to other big banks like JP Morgan Chase (JPM), Citigroup (C) and Bank of America (BAC), all of which are scheduled to report their 2Q09 results soon.

We expect to see stronger trading revenues and lower funding costs. These banks have much larger retail businesses than Goldman, and we expect to see much higher losses in consumer loans (especially credit card loans) and continued losses in mortgage and commercial real estate loan portfolios.

Read the full analyst report on GS

Read the full analyst report on JPM

Read the full analyst report on C

Read the full analyst report on BAC