Investment bank Goldman Sachs Group Inc. (GS: Quote) on Tuesday reported a 12 percent decline in profit for the second quarter, reflecting lower investment banking revenues and a decline in the value of its investments.
Nevertheless, both earnings and revenue beat analysts' estimates, sending the company's shares up by more than 2 percent in pre-market trading.
Lloyd Blankfein, Chairman and Chief Executive Officer of Goldman Sachs said, "During the second quarter, market conditions deteriorated and activity levels for both corporate and investing clients were lower given continued instability in Europe and concerns about global growth. Still, we remain focused on meeting our clients' needs, while prudently managing our capital, liquidity and risk."
Among the bank's peers, JP Morgan Chase & Co. (JPM: Quote) last week reported a 9 percent decline in second-quarter profit, by a hefty trading loss at its Chief Investment Office or CIO.
Citigroup Inc. (C) on Monday reported a 12 percent drop in profit for the second quarter amid lower revenues. The firm's investment banking reported a 21 percent decline in revenue.
Goldman Sachs' second-quarter net earnings declined to $927 million or $1.78 per share from $1.05 billion or $1.85 per share in the year-ago period. On average, 23 analysts polled by Thomson Reuters expected the company to report earnings of $1.17 per share. Analysts' estimates typically exclude special items.
Net revenues for the quarter declined 9 percent to $6.63 billion from $7.28 billion in the prior-year period, but beat analysts' consensus estimate of $6.28 billion.
Investment banking revenues declined 17 percent from the year-ago period to $1.20 billion, but increased 4 percent sequentially.
Of the total investment banking revenues, financial advisory revenues dropped 26 percent, reflecting a decline in industry-wide completed mergers and acquisitions. Underwriting revenues declined 9 percent from last year due to lower equity underwriting that offset an increase in debt underwriting.
Net revenues in Institutional Client Services rose 11 percent to $3.89 billion, but declined 32 percent from the preceding first quarter.
Revenue from Fixed Income, Currency and Commodities Client Execution surged 37 percent from last year to $2.19 billion, reflecting higher net revenues in mortgages and commodities compared with difficult market-making conditions during the prior year.
Net revenues in Investing & Lending plunged 81 percent to $203 million. The results include a loss of $194 million from Goldman Sachs' investment in the ordinary shares of Industrial and Commercial Bank of China Limited or ICBC, and net losses of $112 million from other investments in equities. Results were also negatively impacted by a decrease in global equity prices and generally wider credit spreads.
Investment Management revenues grew 5 percent from last year to $1.33 billion, reflecting significantly higher incentive fees, partially offset by lower management and other fees and lower transaction revenues.
Goldman Sachs' board declared a quarterly dividend to $0.46 per common share, to be paid on on September 27, 2012 to common shareholders of record on August 30, 2012.
GS closed Monday's trading at $97.68. In Tuesday's pre-market, the stock is up $2.23 or 2.28 percent to $99.91.
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by RTT Staff Writer
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