Goldman Sachs grows earnings despite 40pc trading revenue drop
Goldman Sachs' second quarter earnings and revenues beat consensus forecasts despite a decline in investment banking and an awful performance for fixed income, currency and commodities (FICC).
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Earnings of $3.95 for the quarter beat estimates of $3.39, on revenues of $7.89bn versus $7.52bn.
Net revenues in institutional client services of $3.05bn for the second quarter were down 17% compared to the same period last year and 9% lower than the first quarter of 2017.
Within this, net FICC client execution revenues crumbled 40% to $1.16bn, well short of expectations of $1.47bn, due to significantly lower net revenues in interest rate products, commodities, credit products and currencies, which was only partially offset by higher mortgage sales.
Investment banking revenues of $1.73bn fell 3% year on year, but were up 2% on the first quarter.
But helping overall group revenues rise 12% to $15.9bn were strong performances in client equities, debt underwriting and investing and lending.
Equities client services generated net revenues of $1.89bn, up 8% year-on-year, 13% QoQ and the highest quarterly results in two years. Revenues from debt underwriting for clients of $721m was the third highest quarterly performance.
Net revenues in investing and lending of $1.58bn was up 42% YoY and 8% MoM, mostly from equity investments up 88% to $1.18bn where gains were attributed to corporate performance and company-specific events, while investment in debt securities and loans were down 18%, primarily reflecting lower net gains from investments in debt instruments, partially offset by higher net interest income.
“A mixed operating environment persisted into the second quarter as conditions continued to support underwriting and M&A, while constraining certain market-making activity,” said chairman and chief executive officer Lloyd Blankfein.
“Against that backdrop, we produced revenue growth and improved profitability for the first half of 2017, reflecting both the diversity and strength of our global businesses.”