Goldman Sachs 2Q earns fall but beats expectations

The world's biggest investment bank parlayed skyrocketing prices in energy and other commodities into net income of more than $2 billion during the second quarter. Results from its commodities business was close to matching the first quarter's record performance, according to Goldman's chief financial officer.

Though investment bankers and asset managers won't be shoved aside by Goldman's commodities traders anytime soon, the strong performance is one demonstration of Goldman's reach during market upheaval. The same can be said about areas such as its prime brokerage, where Goldman executes trades on behalf of hedge funds and other institutional investors.

"Nobody really knows what the next hot area next to investment banking and trading will be, so the key becomes having diversified capabilities and being nimble enough to move where the opportunities present themselves," said Jeffery Harte, an analyst with Sandler O'Neil. "Unfortunately, if you get in a bear market, diversification carries you only so far--Goldman is still down year-over year."

The company reported a profit of $2.05 billion, or $4.58 per share, for the three months ended May 30, compared to $2.29 billion, or $4.93 per share a year earlier. Revenue fell 7 percent to $9.42 billion from $10.18 billion a year earlier.

The latest results easily surpassed Wall Street expectations for a profit of $3.42 per share on $8.74 billion of revenue, according to analysts surveyed by Thomson Financial.

Lloyd Blankfein, Goldman's chairman and chief executive, said he was pleased with how the company performed given the market's turbulence. Global banks and brokerages have been roiled by the implosion of mortgage-backed securities and leveraged loans, which forced them to write down nearly $300 billion worth of assets since last year.

"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," he said in a statement.

The Goldman results were in sharp contrast to the nearly $3 billion loss that Lehman Brothers Holdings Inc. reported on Monday. The nation's fourth-largest investment bank was forced to raise nearly $6 billion in fresh capital, and investor angst about the loss led to the demotions of its chief financial officer and chief operating officer.

During the second quarter, Goldman indicated that the risk from commodity operations had doubled from the year-ago period. The average daily value-at-risk, a Wall Street gauge that sums up the potential losses, for commodities rose to $48 million in the quarter from $38 million last year.