Goldman Sachs reported a big drop in second-quarter earnings yesterday following a large jump in legal and regulatory costs and weak bond trading results.
Net earnings in the quarter ending June 30 fell to $1.05bn from $2.04bn in the year-ago period.
Adjusted earnings were $916mn, down 67% from the year-ago period. Adjusted earnings translated into $1.98 per share, much below the $3.89 projected by analysts.
The investment bank had $1.45bn in legal and regulatory costs, up from $284mn last year.
Revenues slipped 0.6% to $9.07bn, topping market estimates of $8.78bn.
Goldman cited mortgage-related litigation as a source of the elevated costs. Goldman is in talks with regulators to pay $2-3bn to resolve issues related to the financial crisis, according to people familiar with the matter.
Goldman reported a 28% drop in trading revenues for fixed income, currency and commodities to $1.6bn. That was partially offset by a 63% rise in equity trading revenues to $787mn.
Revenues in three of four Goldman’s operating divisions rose. This included increases for financial advisory services amid strong merger and acquisition activity.
Revenues also rose for both equity and debt underwriting.
“We are pleased with our performance for the quarter,” said Goldman chief executive Lloyd Blankfein in a statement.
“While uncertainty in the EU weighed on investors’ level of conviction, many of our businesses continued to benefit from generally improving economic conditions and healthy client activity.”
