Three weeks ago, it was reported that Goldman Sachs
And that it was. Net income for the second quarter came in at $3.4 billion, or $4.93 per share on record revenue of $13.8 billion. Without a $426 million dividend paid to taxpayers for the $10 billion TARP payment (which has since been repaid), Goldman would have earned $5.71 per share -- up 25% from the year before.
Record results might seem odd just nine months after Wall Street bit the dust. But the reason Goldman has turned into such a rainmaker is, ironically, precisely because of both Wall Street's and the economy's collapse.
The bulk of Goldman's earnings came from a) divisions with much less competition now that Bear Stearns, Lehman Brothers, and armies of hedge funds have died, and b) divisions that help other companies raise debt and equity to make it through the economic downturn. Have a look:
Division |
Net Revenue |
Change (YOY) |
---|---|---|
Equity Underwriting |
$736 million |
19% |
Debt Underwriting |
$336 million |
25% |
Fixed Income, Currency, and Commodities |
$6.8 billion |
186% |
Investment Banking Advisory (mergers and acquisitions) |
$368 million |
(54%) |
Total Trading and Principal Investments* |
$10.8 billion |
93% |
*Houses fixed income, currency, and commodities division.
The big standout -- fixed income, currency, and commodities -- is blowing up not only from less competition, but a steep yield curve thanks to low interest rates and continued volatility in debt markets. This isn't unique to Goldman. Last quarter, JPMorgan Chase
The other moneymakers, equity and debt underwriting, have the wind behind their backs as companies from all industries exploited market optimism to raise capital in the second quarter. After markets rebounded in March, everyone from Bank of America
This is all great news for Goldman -- and will likely spill over to Morgan Stanley
But for now, Goldman is minting money. Enjoy it while it lasts.
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