goldman sach produce 4 bil net profit

GS to show the way for MAE...

GS Midas touch...

GS the turn around kings postrd a $4bil net profit.

http://blogs.news.sky.com/cityblog/Post:1aff8adb-8bf6-4e03-ab47-a815de759a3a

Who says all that glitters isn’t gold?

Wall Street titan Goldman Sachs defied one of the worst banking crises in history today with a whopping net profit of £2.1bn for the second quarter.

Reading the company’s statement, you’d be forgiven for thinking the credit crunch never actually happened.

Goldman Sachs boasted it ‘ranked first worldwide' in announced mergers and acquisitions and said that share trading, issuing and underwriting ‘generated record quarterly revenues,' reflecting ‘strong results’ across client franchises.

I don’t know about you but I was under the impression that words like ‘record’ and ‘strong’ had gone out of fashion when describing bank earnings since the onset of the credit crunch in 2007.

Mind you, while Goldman Sachs is technically now a ‘bank’ after having to accept funds from the U.S. government’s Troubled Asset Relief Programme, the reality is that this institution has little in common with other ‘banks’ in Britain and America.

In fact one analyst told me that far from being the U.S’s fifth largest ‘bank,’ Goldman Sachs was ‘more like the world’s largest hedge fund.’

As such, the company can also afford to keep staff costs high.

Headcount at Goldman Sachs fell just 1% to 29,400 just as troubled lenders like Royal Bank of Scotland here have announced thousands of job losses.

To be precise, compensation is one of the key pillars upon which Goldman’s ‘Golden Touch’ is built.

Already famous for paying average bonuses of around £250,000 per employee a few years ago, Goldman said today it had set aside even more money to reward its staff.

The firm has earmarked £4bn for compensation and benefits payments this year versus just under £3bn last year.

I wonder how many firms can afford to put aside 48% of revenues to pay their staff these days.

Then again, a proper crisis provides opportunities for those with the means to harness them and this is exactly what Goldman Sachs has done thanks to its well-paid and well-qualified employees.

As Lehman Brothers went under, investors caught fright and sold their shares, companies looked to sell new stock for cash and those firms who struggled were taken over, giving Goldman Sachs a chance to make money advising such clients, often other financial firms, during the downturn.

This is part of the reason why despite repaying around £6bn of those TARP funds, the issue of Goldman Sach's plush pay packets could become politically explosive.

How CEO Lloyd Blankfein steers the company through the contentious bonus issue will determine whether Goldman can keep its independence and dominant position as one of the world's most sophisticated finance firms.

Let's hope he remembers that even gold does tarnish