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New York - Goldman Sachs Group, the Wall Street bank most reliant on trading, posted a 74% increase in second-quarter profit as litigation and compensation costs fell and fixed-income revenue surpassed analysts’ estimates.
Net income rose to $1.82bn, or $3.72 a share, from $1.05bn, or $1.98, a year earlier, when the company had a $1.45bn provision for legal and other regulatory matters, New York-based Goldman Sachs said on Tuesday in a statement. Eighteen analysts surveyed by Bloomberg estimated per-share earnings of $3.05.
Chief executive officer Lloyd Blankfein, 61, is investing in technology and carrying out the biggest expense cuts in years. More than 400 employees have been dropped this year, including traders and salespeople in the securities unit.
The effort is getting a boost from a rebound in fixed-income trading, which surged 33% in the second quarter, topping analysts’ estimates.
"We achieved solid results by continuing to serve our clients across our diversified franchise and by managing our business efficiently," Blankfein said in the statement.
Goldman Sachs’s board left the firm’s quarterly dividend unchanged at 65 cents a share, payable on September 29 to shareholders of record on September 1, according to the statement. The company was expected to increase the pay out to 70 cents, according to the Bloomberg Dividend Forecast.
Goldman Sachs fell 0.5% to $162.50 at 8:08 a.m. in New York. The stock dropped 9.4% this year through on Monday, the worst performance in the Dow Jones Industrial Average.
The second-quarter increase in fixed income follows a five-year slump in the market that left Goldman Sachs’s market share against its largest US competitors the smallest since the financial crisis in the 12 months through March.
Trading results
Net revenue in the second quarter dropped 13% to $7.93bn, beating the $7.55bn estimate. Expenses fell 26% to $5.47bn, higher than the $5.34bn projected by analysts. Provisions for legal matters declined to $126m and compensation costs slid 13% to $3.3bn.
Fixed-income trading revenue rose to $1.93bn, beating the $1.8bn estimate of six analysts surveyed by Bloomberg.
Equities trading revenue of $1.75bn, an 11% drop, missed the $1.88bn estimate. The trading figures exclude an accounting adjustment in last year’s second quarter. The sales-and-trading division is overseen by Isabelle Ealet, Pablo Salame and Ashok Varadhan.
Revenue from investment banking - run by Richard Gnodde, David Solomon and John Waldron - fell 11% to $1.79bn, exceeding the $1.56bn estimate. Investment management, run by Tim O’Neill and Eric Lane, reported an 18% drop to $1.35bn.
The bank completed the purchase of General Electric’s online bank in the second quarter, adding more than $16bn in deposits in one of the most-watched strategy shifts at Goldman Sachs, which became a bank holding company after the financial crisis.
The firm is also developing a consumer-lending operation as it seeks to do more business with Main Street.
Goldman Sachs is the fifth of the six biggest US banks to report results. JPMorgan Chase kicked off earnings season last week by beating estimates as fixed-income trading revenue and loan growth jumped.
Citigroup and Bank of America also exceeded estimates, while Wells Fargo & Corporation’s results were in line with expectations. Morgan Stanley is scheduled to report on Wednesday.
