Trading Holds Back Goldman in 2Q, But Net Jumps 77%
Profits at Goldman Sachs (NYSE:GS) surged by 77% in the second quarter, but the Wall Street heavyweights results failed to meet expectations due to a rocky performance in trading as the bank dialed back on risk.
Disappointed by the weaker-than-expected results, traders bid Goldmans stock further into the red on the year.
New York-based Goldman said it earned $1.09 billion, or $1.85 a share, up from $613 million, or 78 cents a share, a year earlier. Analysts had called for stronger EPS of $2.27.
While profits soared, net revenue declined 18% to $7.28 billion, coming in well shy of the Streets view of $8.14 billion.
During the second quarter, the operating environment was more difficult given global macro-economic concerns, CEO Lloyd Blankfein said in a statement.
Goldmans results were hurt by a 39% decline in market-making revenue and a 53% plunge in fixed-income, currency and commodity revenue.
Goldman blamed the decline in trading revenue on lower results in mortgages, commodities and interest rate products amid high levels of uncertainty and lowered liquidity that prompted it to operate at generally lower levels of risk.
On the other hand, the companys investment bank posted a 54% leap in revenue and ranked first in worldwide announced mergers and acquisitions year-to-date.
Certain of our businesses had disappointing results as we reduced our market risk in response to attempting to manage fluctuations in prices and market liquidity, said Blankfein. Despite these challenges, we continued to address our clients needs through our strong global franchise and are well positioned to respond as economic conditions and sentiment improve.
Shares of Goldman fell 3% early Tuesday in response to the results. The banks stock has declined more than 23% year-to-date as Goldman deals with a slew of regulatory concerns related to its conduct leading up to the financial crisis.
Other big banks reported mixed results on Tuesday as Bank of America (NYSE:BAC) posted a record loss of $8.8 billion and Wells Fargo's (NYSE:WFC) profits exceeded expectations.