Goldman Sachs on Tuesday said it earned $3.44 billion in the second quarter, or $4.93 a share, up from $2.08 billion, or $4.58 a share, a year ago, thanks to record gains in equity underwriting and trading.

Net revenue came in at $13.8 billion, up 46%.

On average, Wall Street was expecting earnings of $3.48 a share on revenue of $10.7 billion. (Excluding a dividend related to the firm’s Tarp preferred stock, earnings were $5.71 a share.)

Equity underwriting saw record revenues of $736 million – surpassing a previous record set in the second quarter of 2000, and fixed income, currency and commodities posted record quarterly revenues of $6.8 billion.

The second-quarter earnings came in stronger than expected. Equity analysts at Standard & Poor’s, for example, had expected Goldman earnings-per-share of $2.82. Shares of Goldman had risen ahead of the actual earnings report amid expectations of a strong showing; the firm’s stock was slightly higher at $149.73 at mid-morning.

“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 and a deep and diverse client franchise,” Goldman’s chairman and chief executive, Lloyd Blankfein, said in a press release.

The strong showing in the second quarter prompted S&P to raise its recommendation on Goldman to “buy” from “hold.”

“We believe Goldman Sachs is gaining market share and benefiting from low-cost funding, and will see continued strong results throughout '09,” said S&P, which hiked its 2009 earnings-per-share estimate to $17.12 from $12.34.

S&P equity analysts also increased their price target for Goldman shares by $28 to $178.

Goldman’s investment banking revenues totaled $1.44 billion. That is off 15% from year-ago levels, but up 75% from the first quarter.

When it comes to trading and principal investments, Goldman said its revenues totaled $10.78 billion – 93% higher than the second quarter of 2008 and 51% higher than the first quarter of 2009. Within fixed income, currencies and commodities, Goldman saw an increase in revenues related to mortgages and commodities from year-ago levels. But the firm said it incurred a $700 million loss in commercial mortgage loans.

Net revenues in equities totaled $3.18 billion up 28% from the second quarter of 2008. The jump was tied to higher net revenues in derivatives.

Principal investments recorded net revenues of $811 million in the second quarter. These included a gain of $948 million related to the Goldman’s investment in the ordinary shares of Industrial and Commercial Bank of China Ltd., a gain of $343 million from corporate principal investments and a loss of $499 million from real estate principal investments.

Net revenues at Goldman’s asset management and securities services business totaled $1.54 billion, down 28% from the second quarter of 2008 but 6% higher than the first quarter of 2009.

Goldman’s operating expenses rose 33% from year-ago levels and 28% from the first quarter to $8.73 billion.

Compensation and benefits expenses – salaries, estimated year-end discretionary compensation, amortization of equity awards and other items such as payroll taxes – totaled $6.65 billion in the second quarter from a year ago because, Goldman says, of higher net revenues.

On the final day of the second quarter, Goldman’s total assets were at $890 billion, its Level 3 assets totaled $54 billion and average global core excess liquidity was $170.95 billion.

Additionally, Goldman said its board approved a 35-cent-a-share dividend to be paid out to shareholders in September.

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