After the dot-com crash eight years ago, the willy-nilly Internet companies thrown together in garages fell from grace to make room for the true Internet darlings like Yahoo! and eBay. In the recent housing bust, subprime mortgage shops have been tossed aside, yet the tried-and-true banks like Wells Fargo (NYSE: WFC ) and US Bancorp (NYSE: USB ) have held strong.
So it shouldn't come as any surprise that -- in the wake of the turmoil that threw Bear Stearns in the gutter, cost the CEOs of Merrill Lynch (NYSE: MER ) and Citigroup (NYSE: C ) their jobs, and rattled Lehman Brothers (NYSE: LEH ) to the core -- at least one investment bank would emerge leaps and bounds ahead of its peers.
That bank is Goldman Sachs (NYSE: GS ) .
On Tuesday, Goldman reported second-quarter net income of $2.09 billion, or $4.58 per diluted share, down a mere 7% from the $4.93 per diluted share earned in the same period last year. Those results zipped past average analyst expectations of $3.42 per share. Net revenue came in at $9.42 billion, also down 7% from last year’s $10.18 billion. Annualized return on equity was 20.4% for the quarter, compared to 19.1% and 9.0% for rivals Morgan Stanley (NYSE: MS ) and Lehman Brothers in their most recent quarters, respectively.
Goldman's pleasing results came from a range of divisions. The financial advisory division saw revenue grow 13% over last year. Asset management saw a 10% boost in net revenue, and security services net revenue soared 30%. Debt underwriting as well as trading and principal investments saw double-digit declines in revenue, but judging by current market conditions, that isn't surprising.
Given its current strength in a time when most of its peers are gasping for air, Goldman's advantage goes well past its strong financial results. Investors and counterparties around the globe are still quivering at the prospect of another Bear Stearns-style implosion. If clients have a choice of investment banks to work with, why chose one struggling to fend off criticism about its ability to live another day?
In an industry where rumors outdo reality, no one's whispering anything sketchy about Goldman. Right now, that's its strongest asset.
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