Goldman Sachs profit beats estimates, boosted by strong equities trading

Goldman Sachs profit beats estimates, boosted by strong equities trading

Goldman Sachs Group Inc reported a 6per cent fall in quarterly profit on Tuesday as the Wall Street investment bank was hurt by muted fixed income trading activity and weakness in debt underwriting.

FILE PHOTO: The ticker symbol and logo for Goldman Sachs is displayed on a screen on the floor at t
FILE PHOTO: The ticker symbol and logo for Goldman Sachs is displayed on a screen on the floor at the New York Stock Exchange (NYSE) in New York, U.S., December 18, 2018. REUTERS/Brendan McDermid/File Photo

REUTERS: Goldman Sachs Group Inc reported a higher-than-expected quarterly profit on Tuesday as the Wall Street investment bank benefited from higher equities trading revenues.

The bank said equities trading revenue increased by 6 percent from a year ago to US$2 billion, the second highest in four years. Goldman said clients were more active than the same period a year ago.

Goldman said it benefited from higher revenues in equities client execution including an improved performance in cash products and derivatives. The bank said clients were more active than in the prior quarter.

However, Goldman's fixed income business suffered another disappointing quarter with net revenue falling by 13 percent. The bank said that reflected significantly lower net revenue from interest rate products and currencies.

Goldman is shifting the focus of its business model away from trading to a more stable, consumer-oriented revenue stream. Despite the better-than-expected performance, revenue still fell at three of its four major businesses, with the biggest declines in trading and investment management.

Like its rivals, the bank faces a challenge to increase revenue in the face of rising geopolitical uncertainties and concerns about the impact of future interest rate cuts by the U.S. Federal Reserve.

Institutional client revenue, which includes trading, slipped 3per cent, while investment banking revenue was down 9per cent. However, revenue from the bank's investing and lending business rose 16per cent, its highest quarterly performance in eight years.

Shares of the bank were up 1.7 percent in pre-market trading.

Evercore ISI analyst Glenn Schorr said Goldman had delivered a "pretty good quarter" with most business lines performing "a little better than expected."

"Looking ahead, we expect management to continue to invest in new initiatives and businesses and return plenty of capital," Schorr said.

Chief Executive David Solomon, who was promoted to the role in October last year, is undertaking a strategic review of the business and plans to announce the results early next year.

The bank has already made moves to further develop its consumer division, by expanding online bank Marcus and launching a credit card with Apple Inc . It also announced plans in May to acquire United Capital, a boutique wealth management firm.

It is aiming to generate US$5 billion in new revenue by 2020.

While overall revenue slipped in the quarter, lower compensation expenses provided some relief. Total operating expenses were nearly flat at US$6.12 billion.

The bank's net earnings applicable to common shareholders in the second quarter fell 6per cent to US$2.20 billion. Earnings per share fell to US$5.81 from US$5.98 a year earlier.

Total net revenue fell 2per cent to US$9.46 billion. (http://bit.ly/2lwdUOM)

Analysts had expected earnings of US$4.89 per share and revenue of US$8.83 billion, according to IBES estimate from Refinitiv.

Goldman's main rival Morgan Stanley is scheduled to report quarterly results on Thursday.

(Editing by Saumyadeb Chakrabarty and Steve Orlofsky)

Source: Reuters

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