Goldman Sachs profit misses estimates

Goldman Sachs Group, the fifth- biggest US bank by assets, reported second-quarter profit that fell short of analysts’ estimates as fixed-income trading revenue fell more than analysts predicted.

Net income climbed 77 per cent 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 per cent if one-time costs are excluded from the 2010 results.

Under Chairman and Chief Executive Officer Lloyd C Blankfein, 56, Goldman Sachs in the past five years has had its only loss as a publicly traded company, in the fourth quarter of 2008, and record earnings in 2009, when trading accounted for 72 per cent of revenue. JPMorgan Chase & Co’s investment bank last week reported a smaller-than-expected 17 per cent decline in overall trading revenue from the first quarter, while the same business at Citigroup dropped 21 per cent.

Goldman Sachs is “a trading-revenue firm more than anything and last quarter was weak,” Matthew D McCormick, a portfolio manager at Bahl & Gaynor Inc who helps manage about $4 billion, said before the results were released. “If they can’t make it on trading revenues, where else are they going to go?”

Goldman Sachs’s shares, which fell 83 cents yesterday to close at $129.33, have declined 23 per cent this year through yesterday in New York Stock Exchange composite trading. That compares with the 8.2 per cent decline 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 UK 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.