Goldman Sachs' Q2 income beats estimates, revenue falls
Goldman Sachs (GS), one of the world's oldest and most influential investment banks, reported Tuesday higher interest income and cost cutting resulted in a 78% gain in second-quarter earnings, but revenue fell due to weaker demand for its investment banking services.
Revenue in investment banking, Goldman Sachs' largest business unit, fell 11% to $1.8 billion in the period as fewer mergers and acquisitions resulted in lower advisory service fees. Underwriting fees tumbled 17% on lower equity underwriting.
They were offset by higher demand for debt underwriting services. Revenues in debt underwriting totaled $724 million.
Total earnings rose to $1.6 billion from $916 million in the year-ago quarter, as overall revenue fell 13% to $7.9 billion.
On an adjusted basis, the company reported earnings of $3.72 per share, beating the $3.05 per share predicted by analysts polled by S&P Global Capital Intelligence.
“Despite the uncertainty created by Brexit, we achieved solid results by continuing to serve our clients across our diversified franchise and by managing our business efficiently,” said Lloyd Blankfein, the company's chairman and CEO.
Revenue in institutional client services, which include trading in equity, debt, currency and commodities markets, rose 2% to $3.7 billion due to higher revenue in "interest rate products and commodities."
Its investing and lending unit, which provides loans to corporate clients, reported a 38% revenue fall to $1.1 billion as investment gains on pubic and private companies and debt securities were lower than a year ago.
Revenue of its investment management unit, which offers wealth advisory and portfolio management services, decreased 18% to $1.4 billion, reflecting lower incentive and management fees. Total assets under supervision increased by $23 billion to $1.31 trillion.
Like its competitors, Goldman Sachs has been trimming costs, including salaries, as global economic and political uncertainties hamper demand for its businesses. Operating expenses were cut 26% to $5.47 billion.
Compensation and benefits expenses, including bonuses, were $3.33 billion, or 13% lower. Total staffing was cut 5% during the quarter.
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