NEW YORK -- Goldman Sachs' second-quarter earnings jumped 78 percent from a year ago as the bank's legal expenses declined and some of its trading desks saw a surge of activity during Britain's vote to leave the European Union.
The bank was not immune to the volatility and uncertainty that plagued its rivals, however, and its advisory business and deal flow slowed.
The investment bank said Tuesday it had a second-quarter profit of $1.63 billion after dividends to preferred shareholders, or $3.72 per share, up from $916 million, or $1.98 per share, in the same period a year ago.
The results easily topped analysts' expectations, with analysts looking for $3.09 per share.
"Despite the uncertainty created by Brexit, we achieved solid results by continuing to serve our clients across our diversified franchise and by managing our business efficiently," Chief Executive Officer Lloyd Blankfein said in prepared remarks.
Goldman's results last year were affected by legal expenses as the bank prepared to settle with state and federal regulators over its role in creating a housing bubble and subsequent financial crisis.
Echoing the other banks that have reported this quarter, Goldman did mostly well in trading. Goldman's fixed income, currency and commodities division had net revenue of $1.93 billion, up 20 percent from a year ago. Stock trading didn't do as well. Revenue there fell 12 percent to $1.75 billion because of slower trading, particularly in Asia.
"It was a respectable trading quarter, but I suspect the bar was raised over the past week with what we saw out of the other fixed-income sales and trading platforms," said Devin Ryan, an analyst at JMP Securities. "Maybe there was an expectation of even stronger results."
Investment banking revenue fell 11 percent to $1.79 billion, reflecting a slowdown in deals. Many companies held off doing deals last quarter because of uncertainty around the British vote. Goldman said its transaction backlog fell in the quarter, which means it sees fewer deals in the pipeline in the coming months.
The difficult quarter meant Goldman did not meet a closely watched metric of profitability: return on shareholder equity, which was 8.7 percent in the quarter, below the 10 percent mark most analysts look for.
Goldman set aside $3.33 billion to pay its employees in the quarter, down 13 percent from a year ago. Goldman's biggest expense is salaries each year, and it's a metric watched by analysts to see how well Goldman is managing expenses.
The investment bank posted revenue of $7.93 billion in the period, also beating estimates.
Goldman's stock fell $1.92, or 1.2 percent, to close Tuesday at $161.41. Its shares are down 10 percent this year so far.
Goldman Sachs is the fifth of the six biggest U.S. banks to report results. JPMorgan Chase & Co. kicked off earnings season last week by beating estimates as fixed-income trading revenue and loan growth jumped. Citigroup Inc. and Bank of America Corp. also exceeded estimates, while Wells Fargo & Co.'s results were in line with expectations. Morgan Stanley is scheduled to report today.
Information for this article was contributed by Dakin Campbell of Bloomberg News.
Business on 07/20/2016