Jul 15, 2020

News | Business | Finance: Goldman Sachs shares jump as earnings blow past the Street on the best trading results in years

Hugh Son



Goldman Sachs reported blowout second-quarter earnings as its reliance on trading and investment banking paid off amid the market turbulence caused by the coronavirus pandemic.
The bank earned $6.26 a share in the second quarter, crushing the $3.78 a share estimate of analysts surveyed by Refinitiv.

Here’s a list of the bank’s significant milestones for the quarter:
  • Revenue of $13.3 billion was the second-highest ever for the firm and up 41% from a year ago.
  • Fixed income trading revenue came  in at $4.24 billion, the highest in 9 years.
  • Equities trading revenue was $2.94 billion, the best quarter in 11 years.
  • Investment banking revenue was a record $2.66 billion.
Goldman shares jumped 4% after the results in premarket trading.

“Our strong financial performance across our client franchises demonstrates the inherent benefits of our diversified business model,” Chairman and CEO David Solomon said in a release. “The turbulence we have seen in recent months only reinforces our commitment to the strategy we outlined earlier this year to investors. While the economic outlook remains uncertain, I am confident that we will continue to be the firm of choice for clients around the world who are looking to reshape their businesses and rebuild a more resilient economy.”

The firm also said it set aside another $1.59 billion for potential credit losses due to the coronavirus.
Here’s what Wall Street expected:

Earnings: $3.78 per share, a 35% decline from a year earlier, according to Refinitiv.
Revenue: $9.75 billion, 3% higher than a year earlier.

Trading Revenue: Fixed income: $2.53 billion; equities: $2.04 billion.
Investment banking revenue: $2.1 billion.
Here’s a link to the full release.

Expectations for CEO David Solomon’s bank were running high after JPMorgan Chase and Citigroup posted strong trading and advisory results that helped the banks beat profit estimates for the second quarter.
Of the six largest U.S. banks, Goldman gets the biggest share of its revenue from Wall Street activities including trading and investment banking. For the past few years that has been a detriment to the firm, as retail banking fueled by cheap consumer deposits has driven the industry’s record profits.

Goldman shares were down 7% this year through Tuesday’s close, compared with the 36% decline of the KBW Bank Index. 

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