Goldman Sachs Earnings Exceed Expectations Despite Slight Year-On-Year Drop

Goldman Sachs Earnings
David M. Solomon, Chairman and CEO of Goldman Sachs, speaks during the Milken Institute's 22nd annual Global Conference (Photo: Reuters / Mike Blake)

Goldman Sachs reported slightly lower earnings for the second quarter of this year compared to the same quarter last year, but it still managed to exceed analysts'' expectations, ensuring its reign as the king of Wall Street.

The New York-based bank's better-than-expected second-quarter results managed to pull its shares up by as much as 1.9 percent on Tuesday, bringing its total year-to-date gain to 29 percent.

The bank's total revenue was down by 2 percent to $9.46 billion when compared to the same quarter last year. However, it still managed to beat analysts' forecast of $8.83 billion for the quarter.

The drop was partly due to a 9 percent year-over-year drop in its investment banking revenue, which still beat analysts' expectations.

Revenues were bolstered by the bank's equities business, which stood at $2.01 billion. This was a 6 percent year-over-year increase and the bank's second-highest quarterly figure in over four years.

Total investment banking revenues were $1.86 billion, beating analysts' estimates of $1.77 billion for the quarter.  Earnings per share for the quarter were pegged at $5.81, exceeding analysts' expectations of $4.89 per share.

Despite reporting slight drops in its revenues and profits, the figures were really not as bad as some investors had expected. The bank continues to gain substantial earnings from its merger advisory work and its operations on initial public offerings (IPOs).

 Major Wall Street banks reported stellar figures this week, sending banking shares higher. Citigroup, JPMorgan, and Wells Fargo all reported better-than-expected results, which drastically shifted investor sentiments.

Fears of lower interest rates and the effects of the multi-front trade disputes under the Trump administration still looms over the major banks, but Goldman Sachs apparently remains unfazed.

Goldman Sachs' CEO, David Solomon, shrugged off worries of interest cuts and geopolitical turmoil, explaining to investors that the bank was in a great position to benefit from the growth of the economy. Solomon remained positive during the company's latest conference call this week and explained that the bank still expected the US economy to grow by as much as 2.5 percent this year.

The executive also revealed that they expect the global economy to grow by 3.4 percent, despite the slower growth in Europe.

Solomon also revealed to investors that the bank was able to pass the Federal Reserve's annual stress test with flying colors. The result allowed the bank to return more capital to its shareholders. Solomon announced that they would be increasing their dividends by 47 percent to $1.25 per share. 

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