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Goldman Sachs shares jump as earnings blow past the Street on the best trading results in years

VIDEO1:5601:56Goldman Sachs shares surge as second-quarter earnings smash expectationsSquawk Box

Goldman Sachs on Wednesday reported blowout second-quarter earnings as its reliance on trading and investment banking paid off amid the market turbulence caused by the coronavirus pandemic.

The bank generated $2.42 billion in profit, or $6.26 a share, according to a press release, crushing the $3.78 a share estimate of analysts surveyed by Refinitiv. Revenue of $13.3 billion was more than $3.5 billion higher than the estimate, fueled by strong results in its trading and investment banking divisions, which made up three-quarters of the firm's revenue in the period.

Goldman shares jumped 4% in premarket trading.

"Our strong financial performance across our client franchises demonstrates the inherent benefits of our diversified business model," CEO David Solomon said in the release. "The turbulence we have seen in recent months only reinforces our commitment to the strategy we outlined earlier this year to investors. While the economic outlook remains uncertain, I am confident that we will continue to be the firm of choice for clients around the world who are looking to reshape their businesses and rebuild a more resilient economy."

The firm also said it set aside another $1.59 billion for potential credit losses due to the coronavirus.

Expectations for CEO David Solomon's bank were running high after JPMorgan Chase and Citigroup posted strong trading and advisory results that helped the banks beat profit estimates for the second quarter.

Of the six largest U.S. banks, Goldman gets the biggest share of its revenue from Wall Street activities including trading and investment banking. For the past few years that has been a detriment to the firm, as retail banking fueled by cheap consumer deposits has driven the industry's record profits.

Goldman shares were down 7% this year through Tuesday's close, compared with the 36% decline of the KBW Bank Index.

Here's a list of the bank's significant milestones for the quarter:

  • Revenue of $13.3 billion was the second-highest ever for the firm and up 41% from a year ago.
  • Fixed income trading revenue came in at $4.24 billion, the highest in 9 years.
  • Equities trading revenue was $2.94 billion, the best quarter in 11 years.
  • Investment banking revenue was a record $2.66 billion.

This story is developing. Please check back for updates.

CNBC

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