Goldman Sachs CEO David Solomon speaking at the World Economic Forum in Davos (Switzerland). 23, 2020.
Adam Galacia | CNBC
Goldman Sachs On Monday, fixed-income traders posted earnings and revenue that beat analysts’ estimates as they posted about $700 million more than expected.
Here are the numbers:
- Earnings: $7.73 per share, according to Refinitiv’s estimate of $6.58 per share
- Revenue: $11.86 billion $10.86 billion
Second-quarter profit fell 48% to $2.79 billion, or $7.73 a share. Still, the results were more than a dollar above the average analyst estimate reported by Refinitiv.
Revenue fell 23% to $11.86 billion, a full $1 billion more than analysts expected, driven by a 55% increase in fixed income.
The bank’s fixed-income operations generated $3.61 billion in revenue, beating the StreetAccount estimate of $2.89 billion on “significantly higher” trading activity in fixed income, interest rates, commodities and currencies. Shares’ revenue rose 11% to $2.86 billion, beating estimates of $2.68 billion.
Goldman shares rose 4.1% in premarket trading.
“We delivered strong results in the second quarter as clients looked to us for our expertise and execution in these challenging markets,” CEO David Solomon said in the release.
“Despite increased volatility and uncertainty, I remain confident in our ability to navigate the environment, dynamically manage our resources and generate long-term, active returns for shareholders,” he said.
Goldman outperforms other banks during periods of high volatility, as demonstrated by the firm’s strong fixed income results.
Including similar to competitors JPMorgan Chase and Morgan Stanley Goldman, which saw a sharp drop in advisory revenue in the second quarter, said investment banking revenue fell 41% to $2.14 billion, slightly above estimates of $2.07 billion. The firm blamed a sharp slowdown in equity and debt issuance in the quarter, which was one victim of rising interest rates and declining financial assets.
The bank said deals lagged compared to the first quarter, which could indicate that potential mergers and IPOs were killed rather than brought back to future quarters.
Goldman also tends to benefit from rising asset prices through various investment vehicles, so broad declines in financial assets can hurt the firm. JPMorgan and Wells Fargo any published correspondence relating to the reduction of loan books or stock.
Goldman shares are down 23% this year through Friday, worse than a 16% decline. KBW Bank Index.
Last week, JPMorgan and Wells Fargo the profit of the second quarter was announced decreases because banks set aside more for expected loan losses, Morgan Stanley disappointed after a bigger-than-expected slowdown in investment banking. Citigroup was the only firm the highest expectations for income as it benefited from rising rates and strong trading results.
This story is evolving. Please check for updates.
