Goldman Sachs Company Earnings Strong, but Shaky

Goldman Sachs
Goldman Sachs

Goldman Sachs Group Inc. (NYSE: GS) reported second-quarter 2013 results before markets opened this morning. The investment bank and financial services giant reported quarterly diluted earnings per share (EPS) of $3.70 on revenue of $8.61 billion. In the same period a year ago, Goldman reported EPS of $1.78 on revenue of $6.63 billion. Second-quarter results also compare to the consensus estimates for EPS of $2.83 on revenue of $7.98 billion.

In the first quarter of this year, the bank reported EPS of $4.29 on revenue of $10.09 billion. Compared with the first quarter, the investment banking segment's revenues were flat, although they were up 29% year-over-year. Underwriting rose 45% year-over-year, but fell 2% sequentially. The sale of the bank's stake in the Industrial and Commercial Bank of China pushed revenues in the investing and lending segment up 169%, to $658 million, equal to about one-third of the bank's net earnings for the quarter.

The bank's CEO said:

Improving economic conditions in the U.S. drove client activity and the strength of our global client franchise allowed us to deliver positive performance across a number of our businesses. While the operating environment has shown noticeable signs of improvement, we continue to put a premium on disciplined risk management, particularly in regard to the firm's strong capital and liquidity levels.

Goldman's Basel I Tier 1 capital ratio rose to 15.6%, up sequentially from 14.4% at the end of the first quarter. The Tier 1 common ratio also rose, from 12.7% at the end of the first quarter to 13.5% at the end of the second quarter.

As was the case in the first quarter, the bank suffered a net outflow of assets under supervision, but by less than half as much. Net outflows totaled $4 billion in the second quarter, compared with $9 billion in the first quarter. Assets under management dropped by $13 billion sequentially to $955 billion.

Shares are trading about 0.9% higher in the premarket this morning, at $164.60 in a 52-week range of $91.15 to $168.20. Thomson Reuters had a consensus analyst price target of around $157.20 before today's results were announced.

Filed under: Banking & Finance Tagged: GS