Goldman Sachs posts $5.5 billion profit as the stock market booms

By Paul R. La Monica, CNN Business

Goldman Sachs, once known as the Vampire Squid of Wall Street, may have gotten a friendlier makeover under CEO David Solomon. But the investment banking giant is still spreading its tentacles into many corners of the market — and making huge sums of money in the process.

The bank said Tuesday that it reported a net profit of nearly $5.5 billion, or $15.02 a share, in the second quarter. That was up sharply from earnings of $373 million in the same quarter a year ago and easily topped analysts’ forecasts.

Shares of Goldman Sachs were down 2% in early trading Tuesday. But the stock has soared more than 40% this year, making it the second-best performing stock in the Dow for 2021.

The Wall Street giant’s strong results were led by solid gains in revenue for its investment banking business, which posted its second best quarter ever, and its asset management unit, which had a record quarter. Overall revenue rose 16% from a year ago to $15.4 billion.

Goldman Sachs has benefited from the stunning comeback in the stock market. Business is booming for the bank’s merger advisory services and Goldman Sachs is also generating big gains in revenue from initial public offerings and debt offerings as companies look to raise cash.

Solomon expressed cautious optimism about the comeback in the company’s earnings release though, saying in the release that “while the economic recovery is underway, our clients and communities still face challenges in overcoming the pandemic.”

During a conference call with analysts and investors, Solomon added that he was concerned about the uptick in Covid-19 cases around the globe, suggesting that a further rise could derail the recovery.

“The Delta variant, should it spread further, could spear policy actions that slow economic growth. We are already seeing this play out in places like Hong Kong and Australia and potentially in parts of Europe,” Solomon said.

He also expressed worries about the fact that progress in getting more people vaccinated “is not consistent across communities and nations, including parts of the United States.”

“Widespread vaccine distribution and high vaccine rates are critical to open and thriving economies. I want to urge policymakers, government officials and business leaders across jurisdictions to do all they can to facilitate these efforts,” Solomon said.

The solid numbers from Goldman Sachs come on the same day that rival JPMorgan Chase also posted healthy earnings for the second quarter. The next big obstacle for Goldman Sachs and other Wall Street firms will be navigating the return to work for many of its New York employees.

Goldman Sachs asked many of its workers to head back to the office last month, while other banks, such as rival Morgan Stanley, are holding off until September.

Solomon said on the conference call that about 50% of its workers are back at offices in New York, Dallas, Salt Lake City, Hong Kong and other locations “on a regular basis.”

He added that “I’ve heard from so many of our people over the last few weeks that they are glad to be back in the office, and clients appreciate that we are showing up.”

But Solomon conceded that not all locations around the world are ready to reopen.

“We recognize that various geographies are navigating different stages of the pandemic, and we’ll continue to provide our colleagues with the support they need. Going forward, we look to reopen more locations consistent with health and safety guidelines of each city in which we operate.”

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