Goldman Sachs Earnings Blow Past Expectations

Powered by solid trading and investment-banking growth, Wall Street heavyweight Goldman Sachs (NYSE:GS) revealed on Tuesday that it more than doubled profits in the second quarter and easily beat the estimates thanks to strengthening economic conditions.

Shares of the New York financial-services firm ticked just slightly higher even as the results solidly exceeded forecasts from analysts.

Goldman said it earned $1.93 billion, or $3.70 a share, last quarter, compared with $962 million, or $1.78 a share, a year earlier. Net revenue soared 30% to $8.61 billion.

Analysts had been calling for EPS of just $2.82 on revenue of $7.98 billion.

“The firm’s performance was solid especially in the context of mixed economic sentiment during the quarter,” CEO Lloyd Blankfein said in a statement. “Improving economic conditions in the U.S. drove client activity and the strength of our global client franchise allowed us to deliver positive performance across a number of our businesses.”

Highlighting the stronger client activity, Goldman’s investment banking revenue rose 29% to $1.55 billion as underwriting revenue soared 45% to $1.07 billion. The bank also benefited from increased equity underwriting activity.

Goldman’s institutional client services division reported an 11% increase in revenue to $4.31 billion.

On the trading front, revenue in fixed income, currency and commodities client execution jumped 12% to $2.46 billion. The company noted that market conditions “across products” were “more challenging during the latter part of the quarter, as interest rates and market volatility increased.”

Blankfein said that even though the operating environment “has shown noticeable signs of improvement,” Goldman focused on “disciplined risk management.”

Tier 1 capital ratio, an important balance-sheet metric, rose to 15.6% as of the end of the second quarter, compared with 14.4% at the end of the first quarter. Global core excess liquidity averaged $180 billion in the second quarter, compared with $181 billion in the first quarter.

Expenses increased 14% year-over-year to $5.97 billion, though that marked an 11% drop from the first quarter.

Compensation and benefits expenses jumped 27% from the year before period to $3.7 billion as net revenues rose. Yet the ratio of compensation and benefits to net revenues dipped in the first half of 2013 to 43% from 44% in the first half of 2012. Total staff shrank 1% from the end of the first quarter.

Goldman’s shares inched up 0.72% to $164.17 ahead of Tuesday’s opening bell, putting them in position to extend their 2013 rally of almost 28%.