Goldman Sachs Group Inc. on Wednesday reported second-quarter profit that beat analysts’ expectations thanks to record revenue growth in its markets and investment banking businesses. The strong Q2 results, which mirror similar gains reported by other banks, were bolstered by surging volatility and the Federal Reserve’s unprecedented actions to prop up financial markets.
The bank posted earnings of $2.25 billion, or $6.26 a share, exceeding the $2.20 billion, or $5.81 a share it posted in the same quarter a year ago. Shares of the New York-based investment bank were up 2.2% in early trading after jumping as much as 3.3% to $221.04 in the premarket.
“The turbulence we have seen in recent months only reinforces our commitment to the strategy we outlined earlier this year to investors,” Chief Executive Officer David Solomon said in a statement.
In terms of Wall Street operations, Goldman Sachs’ traders exceeded expectations that were already heightened for the second quarter. Revenue from trading stocks and bonds jumped by 93 percent to a record $2.5 billion, fueled especially by strong fixed income trading. Total global markets revenue soared to $7.18 billion.
Fixed income, currency and commodities (FICC) revenue more than doubled to $4.24 billion from $1.70 billion and equities revenue increased 46 percent to $2.94 billion.
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FICC generated $5.9 billion of revenues in 2018, its lowest level in 20 years. The cumulative decline over the last three years was 22 percent, worse than most of Wall Street peers.
Q2 results offset Corona fallout
Despite the upbeat results that crushed all Wall Street estimates, the provision for credit losses ballooned to $1.6 billion from $214 million in Q2 2019 and $937 million in the first quarter. Reflecting the overall deteriorating economic forecasts, the build-up in loan loss reserves, which was the largest for any quarter since the Great Recession, led quarterly profit to fall by a third from the year-ago period.
Revenues from asset management business also fell 18 percent to $2.1 billion.
Goldman Sachs’s latest figures helped the company offset a halving in its Q1 profits. Almost all banks had seen their fortunes battered in the first quarter due to the pandemic’s initial fallout.
HSBC, for example, said in March it has taken a $200 million floating loss after price of gold in New York and London has diverged by the most in four decades.