Goldman Sachs Group Inc.'s second-quarter earnings jumped 65% as the banking giant's results widely beat analysts' views on a smashing performance at its trading operations.
Analysts had said fixed income, currency and commodities trading would likely be the star division again for Wall Street banks as credit spreads continue to narrow. The company didn't disappoint, with the segment's revenue more than doubling to $6.8 billion, reflecting strength in most businesses and record results in credit products.
Still, Goldman shares were little changed premarket Tuesday.
Equity underwriting boomed during the period as dozens of banks raised money to strengthen capital and repay Troubled Asset Relief Program funds. Toxic assets, including mortgage-related securities and leveraged loans, continue to pose a risk of write-downs for investment banks.
"While markets remain fragile and we recognize the challenges the broader economy faces, our second-quarter results reflected the combination of improving financial-market conditions," Chairman and Chief Executive Lloyd Blankfein said. He added the company was active as an underwriter for "many significant debt and equity offerings."
Goldman posted income of $3.44 billion, or $4.93 a share, up from $2.09 billion, or $4.58 a share, a year earlier. The latest results included a $426 million dividend related to the company's paying back its TARP funds. Excluding that, earnings were $5.71 a share. Net revenue jumped 46% to $13.76 billion.
Analysts surveyed by Thomson Reuters expected earnings of $3.48 and revenue of $10.66 billion.
Investment-banking revenue fell 15% as financial-advisory revenue dropped 54% on a decline in industrywide completed mergers and acquisitions.
The company said Monday it had no material exposure to struggling financial company CIT Group Inc. (CIT), saying it had provided $3 billion to the bank, which is on the brink of bankruptcy, more than a year ago, but offset that with collateral and hedges.
Until recently, Goldman had been known as having a magic touch after a correct bet that subprime mortgages would crater and its avoidance of other messes. But Goldman has been facing danger from its heavy exposure to the stock markets, which have been volatile in recent months, and its "book" of so-called distressed investments, which includes everything from troubled auto loans in Thailand to struggling golf courses in Japan.
Goldman was one of 10 banks that repaid its funding from TARP, paying back the $10 billion it got from the Treasury Department last year after it got its charter as a bank holding company in September. Many banks had said they wanted to pay the money back as soon as possible because of restrictions imposed by the government, including on executive pay.