This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Goldman Sachs Reaps Big Profits from Fixed Income

Stocks in this article: GS

(Update includes new analyst comments; updates share prices throughout.)

Goldman Sachs (GS) reaped huge profits from its giant, opaque fixed income, currencies and commodities division for the second straight quarter, apparently benefitting above all from reduced competition.

On a conference call discussing the earnings Tuesday morning, Goldman CFO David Viniar gave the impression that the strong revenues in that division, as well as in equities trading, came above all from acting as an agent between two parties, or providing services such as hedging, rather than by making risky investments.

Goldman's overall profit of $3.44 billion, or $4.93 per share, is more than 6% higher than the highest estimate of 16 analysts polled by Thomson Reuters. The consensus analyst estimate was a profit of $3.54 a shares, according to Thomson Reuters.

The ability to take advantage of the turbulent markets impressed several analysts.

"Goldman Sachs is the only company within our entire coverage universe that is actually benefiting from the continued dislocation in credit markets globally," wrote analysts at William Blair & Co.

Credit Suisse analyst Howard Chen increased his price target to $180, citing Goldman's "best-in-class franchise with solid market positioning across myriad businesses and strong balance sheet." He sees an opportunity for continued success both in its ability to act as a middleman and to take risk on its own balance sheet.

That Goldman could make so much money without taking on significant risk is an indication of just how skittish and damaged other large financial institutions are compared with Goldman. Net revenues in its FICC division for the last six months were $13.36 billion, shattering the $5.52 billion in net revenues Goldman posted in the first six months of 2008. Value at Risk, the measure of how much money Goldman could lose in a single trading day, has gone up -- to $245 million for the quarter, compared to $184 million in the second quarter of 2008. But this seems like peanuts alongside the giant revenue figure.

1 of 2

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,380.41 +263.17 1.63%
S&P 500 1,886.76 +24.00 1.29%
NASDAQ 4,258.4380 +41.0480 0.97%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs