(Bloomberg News) Goldman Sachs Group Inc., the U.S. bank that makes most of its money from trading, reported second-quarter profit that fell short of analysts' estimates as fixed-income revenue plunged 63 percent from the first quarter.
Net income climbed 77 percent to $1.09 billion, or $1.85 per share, from $613 million, or 78 cents, in the same period a year earlier, the New York-based company said today in a statement. That compares with the $2.30 per-share average estimate of 23 analysts surveyed by Bloomberg. Earnings fell 38 percent if one-time costs are excluded from the 2010 results.
The fixed-income trading-revenue drop was more than twice as large as at any other major U.S. bank. Overall trading revenue at Goldman Sachs, led by Chairman and Chief Executive Officer Lloyd C. Blankfein, fell 47 percent from the first quarter. JPMorgan Chase & Co.'s investment bank reported a smaller-than-expected 17 percent decline in trading revenue last week, while the same business at Citigroup Inc. fell 21 percent.
"All the news is going to be about Goldman Sachs today because people brought their numbers down and they still missed those numbers," Paul Miller, an analyst at FBR Capital Markets, said in an interview on Bloomberg television. "The question is going to be why were their revenues down much greater than their competitors? Probably they were positioned differently."
Analysts in the Bloomberg survey reduced their earnings estimates by an average of $1.09 per share in the past four weeks.
Goldman Sachs fell $3.33, or 2.6 percent, to $126 in New York Stock Exchange composite trading at 9:31 a.m., the biggest drop in the 81-company Standard & Poor's 500 Financials Index.
Last year's second-quarter earnings were reduced by a $550 million settlement with the Securities and Exchange Commission and a $600 million expense to pay a U.K. tax on employee bonuses. Excluding those costs, earnings would have been $1.76 billion, or $2.75 per share, in last year's second quarter.
"Certain of our businesses had disappointing results as we reduced our market risk in response to attempting to manage fluctuations in prices and market liquidity," Blankfein, 56, said in the statement.
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