Goldman Sachs Reports Quarterly Profits of $3.4B

Goldman's turnaround, less than a year after the bank barely weathered the financial crisis that put several of its competitors out of business, is due largely to the strength of its fixed income, currency and commodities division, which trades mortgage securities and other credit instruments. That division posted record revenues of $6.8 billion.

The bank's overall second-quarter profits rang in at $3.44 billion, or $4.93 a share, up from $4.58 a year ago and $3.93 for the previous quarter.

"While markets remain fragile and we recognize the challenges the broader economy faces, our second-quarter results reflected the combination of improving financial market conditions and a deep and diverse client franchise," Lloyd C. Blankfein, Goldman's chief executive, said in a release.

The bank's rebound is likely to assuage concerns that Wall Street remains hobbled by the credit crunch. The better-than-expected earnings report may set the tone for other big banks' earnings reports due in the days to come, including JP Morgan Chase, Bank of America and Wells Fargo.

But questions are also being raised about how Goldman was able to so quickly return to profits even as it enjoyed a multi-billion dollar cushion from the U.S. government. On Monday, the Financial Times reported that Goldman executives sold nearly $700 million of stock during an eight-month period following the collapse of rival Lehman Brothers last September. Most of the sales, the newspaper reported, occurred during the period the bank had a $10 billion federal lifeline.