Goldman CFO says commodities talk "overblown"

NEW YORK (Reuters) - Goldman Sachs Group Inc (GS.N: Quote, Profile, Research) said on Tuesday it earned less from commodities in its latest quarter than the first quarter and described market views of its success in the sector as "way overblown."

The No. 1 U.S. investment bank did not break down profits it made from commodities in the second quarter to May 30. But in financial results released on Tuesday, it indicated that the risk from commodity operations had doubled from a year ago.

Goldman's average daily value-at-risk (VaR) for commodity prices reached $48 million in the second quarter to May 30, up from $38 million in the first quarter and $24 million in the quarter to May 25 last year, the results showed.

The VaR figure sums up the potential loss in value that Goldman's trading positions in commodities may face due to adverse market movements over a one-day time horizon.

Goldman's commodity operations, the largest among investment banks, are widely watched by the industry. Goldman was the first to forecast the price of $100 a barrel for crude oil when such levels were far away, and was in the news again recently with a $200-a-barrel forecast for oil over the next 2 years.

But Goldman's Chief Financial Officer David Viniar said in a conference call that market talk of the firm's commodity trading results in the second quarter was "way overblown".

He said results from commodities were weaker in the second quarter than the first quarter.

Viniar also attributed the rise in the bank's commodities VaR to "greater market volatility and activity."

Goldman as a group reported an 11 percent drop in second-quarter earnings due to turmoil in financial markets. But the firm again exceeded market expectations by avoiding major losses on assets slammed by the credit crisis.

(Reporting by Barani Krishnan; Editing by Brian Moss)