Goldman Sachs Group Inc.'s profit tumbled 49 percent as fixed-income trading revenue dropped more than its rivals and litigation expenses rose fivefold.

Second-quarter net income fell to $1.05 billion, or $1.98 a share, from $2.04 billion, or $4.10, a year earlier, the New York-based company said Thursday in a statement. Excluding the $1.45 billion legal cost and an accounting adjustment, earnings were $4.49 a share, beating the $3.96 average estimate of analysts in a Bloomberg survey.

The highest investment-banking fees since 2007 weren't enough to offset the decline in fixed income, which fell amid concern Greece would be forced to abandon the European common currency. Goldman Sachs's 35 percent drop in bond-trading revenue was steeper than JPMorgan Chase & Co.'s 21 percent decline and the 9.3 percent slide at Bank of America Corp.

That business "was down quite a bit more than we saw at some of the peers," Devin Ryan, an analyst at JMP Group Inc. in New York, said in a phone interview. "I suspect they had a pretty challenging June; you had some sharp market moves then."

Legal costs were higher than the previous five quarters combined, as Goldman Sachs continued talks with the U.S. Justice Department over a settlement of a probe into its sales of mortgage bonds leading up to the financial crisis. The bank may pay as much as $3 billion, a person familiar with the talks said last month.

The shares, which climbed 9.9 percent this year through Wednesday, declined 0.8 percent to $211.33 at 8:35 a.m. in New York.

Fixed Income

Fixed-income, currency and commodity trading revenue was $1.45 billion, excluding accounting adjustments. That fell short of estimates of $2.05 billion from Macquarie Group Ltd.'s David Konrad and $2.11 billion from Steven Chubak at Nomura Holdings Inc.

Goldman Sachs's equities division posted a 21 percent increase from a year earlier to $1.97 billion, excluding accounting charges. That compared with Konrad's $1.86 billion estimate and a projection of $1.87 billion from Chubak.

Total revenue from sales and trading, led by Pablo J. Salame, Isabelle Ealet and Ashok Varadhan, was $3.42 billion. That compared with $4.51 billion at JPMorgan and $3.33 billion at Bank of America.

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