Goldman Sachs income jumps but still misses estimates

NEW YORK — Goldman Sachs’s earnings more than doubled in the second quarter, but a slump in its bond trading business kept its bottom-line results well below what analysts were expecting.

The investment bank earned $1.05 billion in the three months ending in June, up from $453 million in the same period a year ago. Per-share earnings were $1.85, well below the $2.35 analysts surveyed by FactSet were expecting. Year-ago earnings per share were 78 cents.

The bank’s shares lost about 0.8 percent, or $1.03, to $128.30 in early trading.

Goldman Sachs Group Inc.’s troubles were largely due to a sharp drop in bond and currency trading as clients held back because of worries over the European debt crisis and a possible downgrade of the U.S. government’s debt rating because of an impasse in Washington over raising the country’s borrowing limit.

Rivals JPMorgan Chase & Co. and Citigroup Inc. also posted declines in trading, but the drop was bigger at Goldman. JPMorgan’s bond trading fell 18 percent compared to the first quarter, and Citi’s fell 20 percent. But Goldman’s revenue from bond and currency trading plunged 63 percent compared to the first quarter, to $1.6 billion from $4.3 billion.

Goldman’s overall revenue fell 18 percent to $7.3 billion. That missed analysts’ expectations of $8.2 billion.

CEO Lloyd Blankfein said in a statement that “certain of our businesses had disappointing results as we reduced our market risk.”

Goldman also lost money on its investment in the Industrial and Commercial Bank of China Ltd.

The investment banking unit was a bright spot. Revenue soared 54 percent on mergers and acquisitions and underwriting for other deals. Revenue from investment management, which includes portfolio management and financial counseling for companies and individuals, increased 14 percent.

Goldman has done relatively well throughout the financial crisis and its aftermath, earning a profit every quarter except for three months in late 2008. At the same time the bank has been a lightning rod for wrath from the public and lawmakers, who see the storied investment bank as a symbol of risky practices in the banking industry that led to the financial crisis.

Goldman was able to increase net income even as revenue fell because it cut costs, though it didn’t give many details. It set aside $3.2 billion for employee pay, 16 percent less than a year ago. Other expenses were down 18 percent, though that was partly because Goldman had to pay a $550 million fine to regulators last year — the largest ever paid to settle Securities and Exchange Commission charges — after it was accused of misleading investors about mortgage securities.

Goldman did not admit or deny wrongdoing. Similar charges could still haunt it: The Manhattan District Attorney’s office recently subpoenaed the bank for information on its activities leading up to the financial crisis. A subpoena is a request for information and doesn’t mean the bank has done anything wrong.

Last month the bank said that it could lay off more than 200 employees, citing economic reasons, beginning later this year. It paid employees an average of about $90,000 in the second quarter. However, it’s difficult to predict annual pay based on one quarter because compensation can swing greatly in volatile units like investment banking.

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