Goldman earnings fall on trading slump, charges
Settlement and industry shifts hurt Goldman
Goldman Sachs Group said quarterly earnings tumbled 82 percent, coming in well short of expectations, as trading and underwriting revenue slumped, raising questions about how well Wall Street's preeminent bank can navigate a shifting industry landscape.
Second-quarter net income of $453 million was hurt by one-time charges, including a settlement of a civil fraud suit brought by the Securities and Exchange Commission and a British tax on bank executives' bonuses.
But even stripping out those costs, Goldman's return on equity, a measure of the bank's ability to squeeze profits out of shareholders' money, was just 9.5 percent. Over the prior four quarters, the average was close to 25 percent.
Goldman's revenue fell 36 percent to $8.84 billion, reflecting weakness in fixed-income trading as well as investment banking, which suffered from a 58 percent drop in debt and equity underwriting revenue.
Revenue fell short of analysts' average forecast of $8.94 billion.
Late Tuesday, a federal judge in New York approved the $550 million settlement announced last week between Goldman and the SEC over claims the firm misled investors in mortgage-related transactions.