Goldman Sachs defies credit crunch again with $2bn profit

Goldman Sachs has once more escaped the deteriorating financial market conditions relatively intact, as it beat analyst expectations in the second quarter to post a $2bn (£1bn) profit, a day after rival Lehman Brothers confirmed its first quarterly loss as a public company.

Most of its Wall Street rivals envy Goldman Sachs for its resilience, as it has become one of the few banks to largely shrug off the impact of the credit crunch.

It yesterday announced profits of $2.05bn for the three months to the end of May following strong performances in its equity and asset management businesses.

While the numbers were down more than 10 per cent on last year's profits of $2.29bn, which was a boom time for investment banking, Goldman did trounce analyst expectations, which had predicted falls of around 33 per cent.

Goldman's chairman and chief executive, Lloyd Blankfein, said yesterday: "Given the difficult market conditions, we are particularly pleased to be able to report strong results for the second quarter."

The shares rose slightly in the morning during trading on the New York Stock Exchange, although they had weakened by lunchtime.

Goldman said its equity underwriting business produced revenues of $616m, which counts as its second best quarter for the business in eight years. Deals it worked on included the record listing of Visa, which raised $17.9bn in March. Fees from its asset management division also hit a record $1.15bn

While Goldman reported a loss of $775m from investments in sub-investment grade credit products following the onset of the credit crunch, it has so far avoided the extent of pain endured by some of its banking rivals. Citigroup, Lehman and UBS have all suffered multi-billion dollar write-downs since last summer, while Bear Stearns was taken over by JP Morgan earlier this year as it verged on collapse.

Ralph Silva, research director at consultancy TowerGroup, said: "Goldman is way out in front in what is a diminishing market. Their results are really good, although the crunch isn't over."

He added: "There has been some speculation in the market whether the market is going to lose one or two players. Goldman Sachs would be in a good position to target one of its rivals."

One name coming into focus as a potential target is Lehman Brothers, which on Monday confirmed a $2.8bn net loss for its second quarter although had raised $6bn to put an end to speculation it would be bought. Blackstone and JC Flowers have been mooted as potential buyers.