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Goldman Beats On Continued Debt Market Strength

Tickers in this article: BAC C GS JPM
  • Second-quarter EPS of $3.70, beating the consensus estimate of an adjusted $2.89 a share, according to Bloomberg.
  • Excluding items, first-quarter net income was $1.93 billion, exceeding the consensus estimate of $1.48 billion.
  • Net revenue came in at $8.61 billion, surpassing estimate of $7.97 billion.
  • Return on equity (ROE) was 10.5%, dropping from first-quarter ROE of 12.4%.

Updated from 7:57 a.m ET with analyst comments and afternoon share prices.

NEW YORK ( TheStreet) -- Goldman Sachs on Tuesday reported better-than-expected earnings after the bank's private equity and debt underwriting businesses performed strongly amid an end-of-quarter surge in interest rates.

Goldman's earnings were buoyed by record debt underwriting revenue and strong year-over-year growth across its trading, investment banking and private equity businesses.

The bank's debt underwriting unit reported record quarterly revenue of $695 million, significantly beating estimates. Those earnings helped to drive flat investment banking revenue from the first quarter of 2013.

The bulk of Goldman's earnings beat is attributable to better than forecast revenue of $1.42 billion from its Investing & Lending unit, driven by rising marks to the bank's private equity investments and its portfolio of securities.

"The beat was primarily driven by investment gains in the Investing & Lending division, a lower than expected tax rate and a slight beat on investent banking fees," Richard Staite, an Atlantic Equities banking analyst, wrote in a note reacting to earnings.

For the quarter, Goldman reported a profit of $1.93 billion, on revenue of $8.61 billion, beating adjusted estimates of $1.48 billion and $7.97 billion, respectively.

Adjusted earnings per share of $3.70 beat an estimate of $2.89 a share, according to analyst forecasts compiled by Bloomberg.

"The firm's performance was solid especially in the context of mixed economic sentiment during the quarter," Lloyd C. Blankfein, Goldman CEO, said in a statement.

After initially trading nearly 2% higher in pre-market trading Goldman Sachs's shares were falling about 1.85% to $159.99, at 1:25 p.m, ET.

Some may be disappointed with Goldman's earnings.

Analysts had expected stronger performance from Goldman's equity underwriting and investment management businesses, as corporations use rising equity markets to sell shares and investors move their money back into stock markets.

Goldman's equity underwriting unit, however, saw revenue decline 5% to $371 million in the second quarter, missing estimates. The bank's GSAM investment management unit, meanwhile, posted flat revenue from year-ago levels at $1.33 billion. Goldman's $1.85 billion in equity trading revenue did beat estimates, according to Bloomberg data.

Goldman's trading earnings also compared favorably to year-ago levels and defied fears of a large sequential drop from first quarter levels..

"They missed the big hit that everybody kind of feared they would have on the spike in interest rates," Marty Mosby, a banking analyst with Guggenheim Securites , said in a telephone interview.