Goldman Sachs Reports Better Than Expected Q2 Performance
US banking giant Goldman Sachs published its financial performance for the second quarter, beating analysts’ expectations. The revenues were driven by investment banking and trading business.
Goldman Revenue at Almost $10B
The bank reported earnings per share (EPS) at $5.81 versus the expected figure at $4.89. The revenue for the quarter was $9.46 billion against the expected $8.83.
Revenue of the investment banking division was $1.86 billion versus the projected figure at $1.77 billion.
Even though the bank showed results above expectations, the total revenue fell 2% compared to the same period of 2018. Revenue of its investment banking unit fell 9% year-on-year. EPS also declined by 2.8% from the second quarter of last year.
The best performer at the bank was the equities division, whose revenue touched $2.01 billion for the quarter, up 6% from the same period of last year. Also, this is the second-highest result in four years. Analysts on average anticipated revenue of $1.80 billion. The unit was boosted by improved market conditions with higher volatility and increasing trading activity when compared to the first quarter. However, as you’ll read below, the bank shouldn’t be too excited about the increase.
All in all, the stock price of Goldman, traded on the New York stock exchange, closed 1.86% higher on Tuesday. Year-to-date, the stock has gained 29%.
Goldman CEO David Solomon commented on the results:
Our business performed well and remains solidly positioned for future growth. While slowing, the global macro backdrop remains broadly constructive.
At the other end, Goldman’s fixed income, currency and commodities division, shortly referred to as FICC, fell short of expectations. The unit’s revenue was $1.47 billion against the expected $1.52, according to a survey conducted by Refinitiv. The result was impacted by lower revenue in interest rate products and currencies, the bank said.
Goldman’s assets under management reached a record high at $1.66 trillion, which represents a 10% surge in annual terms and a 4% increase compared to the first quarter. The investing and lending revenues hit $2.53 billion, which the best result in eight years.
Mike Mayo, senior analyst at Wells Fargo, commented:
Goldman is progressing fine through what we consider a transition year with the new CEO. It exceeded expectations on the strength of higher stock markets, which helped equity gains.
Goldman’s Gain in Equities is Not Sustainable
While Goldman’s equities business benefited from an increase in the stock markets, analysts claim that those gains are not sustainable. They say that the bank should provide more insight into how it actually boosted equities income. Otherwise, the positive result is not a significant contributor to the bank’s overall performance.
Moody’s SVP David Fanger said:
We consider these to be solid results given the operating environment... but they underscore the importance of the firm’s strategic initiatives.
Goldman benefited from co-managing the initial public offering of Tradeweb. However, without the gains from the IPO, the bank is experiencing:
Muted client activity levels... investor concerns over trade and tariffs, uncertainty over shifts in central bank policy, and tighter credit markets compared with a year ago.
Fanger also said.
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