Goldman Sachs says its second-quarter profit slumped by half on legal costs.
The Wall Street bank said on Thursday its net income applicable to common shareholders fell to $916 million, or $1.98 per share, in the three months to June 30, from $1.95 billion, or $4.10 per share, a year earlier.
“During the quarter, the firm recorded $1.45 billion in net provisions for mortgage-related litigation and regulatory matters”, the company said. Without the fees, Goldman Sachs would have reported earnings of $4.75 a share, compared with an average estimate from analysts of $3.96 a share.
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This beat Q2 revenue estimates by $290 million, according to Seeking Alpha. The firm is in talks to be the latest major bank to settle a Justice Department probe into sales of mortgage securities before the financial crisis. However, the bank’s relatively stable revenue and rising adjusted profits reflected strong corporate and investor activity in the US and a continued focus on cutting expenses such as compensation.
Analysts at Citigroup Inc. reiterated a “hold” rating and set a $210.00 price target (up previously from $190.00) on shares of Goldman Sachs in a research note on Monday.
JPMorgan Chase & Co’s FICC revenue fell 10 per cent during the period on an adjusted basis, while Bank of America’s fell 9.3 per cent. This helped offset a 6 percent decline in underwriting revenues, due to lower net revenues in debt underwriting, on lower leveraged finance activity. The stock has climbed 9.9 percent this year. That was the same percentage as in the first quarter, and down from 43 percent a year earlier.
Goldman said it had paid out $3.81bn over the quarter in pay and benefits including salaries and bonuses.
Goldman’s stock has outperformed the broader S&P 500 financial sector during the past year.
Strengths for the firm included investment banking, where revenues increased 13% to $2.02 billion, driven by an over 60% increase in advisory fees.
In the investment management division, revenues were $1.65 billion, or 14% higher than the year-ago quarter and 4% higher than last quarter.
Goldman Sachs held the top spot among arrangers of global equity, equity-linked and rights offerings for the first half of this year, according to data compiled by Bloomberg.
Second-quarter revenue from investment banking, the business run globally by Richard J.