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Goldman Sachs' quarterly profit of $2.7 billion is way above analysts' expectations

NEW YORK — Goldman Sachs is emerging as the king of post-meltdown Wall Street.

Already the nation's most powerful financial company before the credit crisis, the bank profited handsomely from Wall Street's rally and the recovering credit markets during the second quarter and distanced itself from the few competitors still standing.

The result was a stunning profit of $2.7 billion — even as the bank repaid $10 billion in federal bailout money. The total blew past what Wall Street analysts were expecting.

Goldman earned $4.93 per share for the quarter after paying preferred dividends. Analysts polled by Thomson Reuters, on average, expected $3.54.

Goldman shares rose 22 cents to close at $149.66 on the New York Stock Exchange. The stock was trading close to $50 during the financial crisis in the fall.

Goldman pulled off a remarkably speedy recovery from fall, when it lost $3.3 billion in four months during the worst of the financial crisis. And it had its best quarter since the end of 2007, when the recession was just beginning.

The results also confirm that despite controversy over everything from its role in the meltdown to the bonuses it pays executives and even the power of its alumni who sit at the highest levels of government, one thing remains constant: Goldman knows how to make money better than anybody else on Wall Street.

"Goldman really is in a class by themselves," said Phillip Silitschanu, a senior analyst with Aite Group. "They've always been the golden child of the market."

While other firms have curtailed risk and preserved cash to protect against further losses, Goldman has returned to what made it so profitable in the past: high-risk trading and investing in everything from mortgages to commodities and underwriting of stock and debt offers.

Of course, Goldman also benefited because there are fewer rivals on Wall Street following the demise of Bear Stearns Cos. and Lehman Brothers Holdings in 2008.

Both companies were felled by their investments in risky, and ultimately failed, mortgage-backed securities.

Goldman is the first bank to report second-quarter earnings. JPMorgan Chase, Citigroup and Bank of America follow this week.

And in a sign that the mood in Washington may be shifting, there was little outrage directed at Goldman from officials who have criticized the firm in recent months.

On Tuesday, President Barack Obama's press secretary was reluctant to discuss Goldman's results.

"I'm generally hesitant — as I think the Treasury Department is — to comment on individual earnings reports," Robert Gibbs said.

Goldman Sachs' quarterly profit of $2.7 billion is way above analysts' expectations 07/14/09 [Last modified: Tuesday, July 14, 2009 9:16pm]
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