Goldman Sachs rising from ashes
NEW YORK — It’s hard to imagine that any bank could emerge victorious from the credit crisis and recession. But Goldman Sachs is thriving while many rivals still struggle.
As weaker banks failed or dialed down their trading over the past year, Goldman picked up the slack and turned it into profits.
It could be a long time before the investment-banking business is truly healthy again, but economic downturns often lead to industry shake-outs, and Goldman is positioning itself to come out on top.
“You just saw a huge shift in the competitive environment,” said Mark Lane, bank analyst at investment firm William Blair, after Goldman posted better- than-expected earnings late Monday of $1.66 billion for the first quarter.
The unit that trades bonds, currencies and commodities pulled in $6.6 billion, its highest revenue ever.
The shift could become even greater if Goldman is successful with plans to quickly pay back the $10 billion in bailout money it received from the government. That could free the bank from restrictions — including limits on executive compensation — and help it increase its lead over rivals that cannot yet repay their federal debt.
Last year, investment banking was turned upside down. Lehman Brothers went bankrupt, while Bear Stearns and Merrill Lynch were bought by JPMorgan Chase and Bank of America, respectively. Goldman and Morgan Stanley were the last two big, independent investment banks, and they applied to become commercial banks — meaning that they must follow capital restrictions.
Goldman Sachs is solely an investment bank. Because of Goldman’s focus on the markets and corporate clients, it does not have to worry as much about the effect of the recession on the average holders of mortgages, credit cards, auto loans and home-equity loans.
Intel
The chipmaker’s first-quarter profit blew past Wall Street’s grim forecasts as its CEO proclaimed Tuesday that personal-computer sales have “bottomed out” and started recovering.
Intel’s optimistic comments were notable because it was the first technology company to report earnings for the first three months of the year. However, Intel disappointed investors by not giving specific revenue guidance.
Intel’s net income of $647 million, or 11 cents per share, was less than half what the company earned in the same period last year. But analysts polled by Thomson Reuters were expecting far worse. They had forecast profit of 3 cents per share.
Johnson & Johnson
The health-care-products maker said Tuesday its first-quarter profit dipped only slightly, beating Wall Street expectations, despite falling sales around the world.
J&J said the recession cut into consumer- product sales but that the biggest drag on revenue was the stronger dollar, which pulled down overall revenue by 6 percent.
The company posted net income of $3.5 billion, or $1.26 per share. That’s down from $3.6 billion in 2008’s first quarter, when earnings per share also amounted to $1.26. The company has been buying back shares over the past year. Revenue fell just more than 7 percent, to $15 billion.
Analysts polled by Thomson Financial expected, on average, earnings per share of $1.22 and revenue of $15.47 billion.
CSX
The railroad operator said first-quarter profit fell 27 percent from a year earlier but handily beat Wall Street’s expectations as cost cuts partially offset lower demand.
CSX said Tuesday it earned $246 million, or 62 cents per share, for the quarter, compared with $351 million, or 85 cents per share, a year earlier. Revenue fell 17 percent to $2.25 billion.
