Goldman celebrates success at the double
Goldman Sachs has beaten Wall Street estimates by doubling its quarterly profit through invest ing its own money and underwriting.
When the second quarter of 2012 is compared with the same period in 2013, Goldman's net income rose from $927m ($1.78 per share) to $1.86bn ($3.70 per share).
Analysts had expected earnings of $2.82 per share, according to Thomson Reuters I/B/E/S, a surprise that led Goldman shares to push up 1.3% at $165.13 before the bell.
Revenue in the bank's fixed income, currency and commodities, or FICC, trading unit, which reflects income from client trading, rose 12% to $2.46bn.
Goldman's investing and lending unit, which invests the firm's own capital, generated revenue of $1.42bn in the quarter, up from $203m a year earlier, driven by a tripling of revenue from debt securities and loans.
The bank's net revenue rose 30% to $8.61bn.
The bond market has been a big breadwinner for Goldman Sachs over the past decade, delivering nearly half of the company's revenue in the best year.
But Goldman's trading and investing units are undergoing changes, driven mostly by regulation, that have made it more expensive to be in many of the businesses that once delivered massive profits.
As a result, return-on-equity – a closely watched measure that shows how much profit a bank can squeeze from its balance sheet – has been pressured in recent years as it has become more expensive for banks to hold risky assets.
Still, Goldman managed to produce 10.5% ROE in the quarter, above the 8% some analysts were expecting and the 10% benchmark that analysts say is break-even to meet a bank's cost of capital. Overall investment banking revenue rose 29% to $1.55bn, helped by a 45% increase in underwriting revenue.
Goldman's results echoed similar trends in the investment banking units of JPMorgan Chase & Co and Citigroup Inc.