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July 19, 2016 at 08:45 AM
Goldman Sachs Group Inc., the Wall Street bank most reliant on trading, posted a 74 percent increase in second-quarter profit as revenue from fixed-income trading and debt underwriting surpassed analysts’ estimates. Expenses declined less than some projections.
Net income rose to $1.82 billion, or $3.72 a share, from $1.05 billion, or $1.98, a year earlier, when the company had a $1.45 billion provision for legal and other regulatory matters, New York-based Goldman Sachs said Tuesday in a statement. That beat the $3.05 average estimate of 18 analysts surveyed by Bloomberg.
CEO Lloyd Blankfein, 61, is investing in technology and carrying out the biggest expense cuts in years to weather an industrywide revenue slump. More than 400 employees have been dropped this year in New York, including traders and salespeople in the securities unit, and total staff fell by 2,000. He’s been helped by a rebound in fixed-income trading, which surged 33 percent in the second quarter. While that topped analysts’ estimates, it was by a smaller margin than at Goldman Sachs’s biggest competitors.
“It was a respectable trading quarter, but I suspect the bar was raised over the past week with what we saw out of the other fixed-income sales and trading platforms,” said Devin Ryan, an analyst at JMP Securities. “Maybe there was an expectation of even stronger results.”
Shares Decline
Goldman Sachs, which gained almost 11 percent in the past month through Monday, fell 1.4 percent to $160.97 at 11:52 a.m. in New York, the worst performance in the Dow Jones Industrial Average. The stock has dropped 10 percent this year.
Goldman Sachs left its quarterly dividend unchanged at 65 cents a share, payable on Sept. 29 to shareholders of record on Sept. 1, the bank said in the statement. The company was expected to increase the payout to 70 cents, according to the Bloomberg Dividend Forecast. The firm repurchased $1.74 billion worth of shares during the second quarter.
Net revenue in the quarter dropped 13 percent to $7.93 billion, beating the $7.55 billion estimate. Expenses declined to $5.47 billion, falling short of the $5.34 billion projection by analysts. Provisions for legal matters declined to $126 million and compensation costs slid 13 percent to $3.3 billion.
