Diluted earnings per share came in at $1.85 for the three months to the end of June, compared with expectations of about $2.27 a share. Analysts had already reduced their targets sharply in recent weeks.
Net revenues were $7.3bn compared with $8.8bn in the same period a year ago and $11.9bn in the first quarter, while net earnings were $1.1bn, up from $613m a year ago but down sharply from last quarter’s $2.7bn.
The sharpest decline came in the fixed-income, currency and commodities business, with revenues 53 per cent lower than the second quarter of 2010 at $1.6bn. This was attributed to “high levels of uncertainty and decreased levels of liquidity” that caused both the bank and its clients to shy away from risk.
Lloyd Blankfein, chief executive, said in a statement on Tuesday that Goldman had been hurt by “macroeconomic concerns” and “certain of our businesses had disappointing results as we reduced our market risk”.
Goldman’s results are the first negative surprise this earnings season. JPMorgan Chase and Citigroup both reported a better-than-expected performance, helped by their more diversified business models, which provided a buffer from weaker trading conditions.
Shares in Goldman fell $4.21, or 3.3 per cent, to $125.21 in pre-market trading on the news before recovering some ground to be down 1.3 per cent at $127.70 by mid-morning on Wall Street.
Diluted earnings per share of $1.85 were higher than the 78 cents of the same quarter last year. But that number was affected by the $550m settlement with the Securities and Exchange Commission to settle, without admitting wrongdoing, allegations of fraud in marketing structured mortgage products.
Some of Goldman’s businesses improved year-on-year, with equities up 19 per cent at $1.9bn on a better showing from derivatives. But commissions and fees were down, the group said, on lower client activity.
Investment banking revenues rose 54 per cent to $1.5bn on a strong showing from underwriting and advisory work. Investment management was up 12 per cent to $1.3bn. The bank’s own principal investments were flat, with net revenues of $1bn, including a loss of $176m from its stake in Industrial and Commercial Bank of China.
Goldman set aside $3.2bn for compensation, a 16 per cent reduction on last year, but a higher percentage of first-half net revenues at 44 per cent. Operating expenses were 23 per cent lower at $5.7bn.
Summary: Goldman Sachs (GS) Earnings Q2 2011
-. t re-. venues of $7.28 billion and net earnings of $1.09 billion for Q2. Earnings per share were $1.85 compared with $0.78 for the second quarter of 2010 and $1.56 for Q1 of 2011.
# As of 30 June 2011, total capital was $247.57 billion.
-. Investment Banking net revenues rose to $1.45 billion, up 54 percent from Q1 of 2011. Net revenues in Financial Advisory totaled $637 million, up 35 percent from Q2 2010.
-. Net revenues in Institutional Client Services were $3.52 billion, 29 percent lower than Q2 2010 and a 47 percent decrease from Q1 2011
-. Net revenues in Investing and Lending totaled $1.04 billion
-. Net revenues in Investment Management were $1.27 billion, representing a 12 percent increase over last year, primarily due to an increase in management and other fees. During the quarter, assets under management increased $4 billion to reach $844 billion.
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