Goldman Sachs Group Inc (NYSE:GS) released its earnings numbers for the three months through June 30 this morning before the market opened on Wall Street. The company showed earnings per share of $4.10 for the quarter, which the investment bank records as its second of 2014. Revenue for the period came in at $9.3 billion. In pre-market trading, investors greeted the news and drove the company’s stock up by more than 2%.
Analysts were expecting a decent return from Goldman Sachs Group Inc (NYSE:GS), but today’s results defied their models. Consensus estimates showed that analysts were looking for earnings of around $3.09 in the second quarter of the year. Revenue was expected to come in at $7.98 billion. The results show that the investment bank is on form and that the collapse in fixed income may have been overplayed by commentators.
Goldman Sachs continues growth
In the same three months of 2013 Goldman Sachs Group Inc (NYSE:GS) showed earnings of $3.70 per share on revenue of $8.6 billion. The company has been known to increase EPS in the past by simply cutting the salaries it pays to its traders. That’s not how the company managed this beat, however. Second quarter revenue for 2014 was well ahead of the same period in 2013, and compensation was 6% higher than the year-ago period.
Goldman Sachs Group Inc (NYSE:GS) grew revenue in a number of areas during the second quarter of 2014. The bank saw underwriting revenues beat records to come in at $1.28 billion, and concreted its position as the number one investment bank in the world in the second quarter. According to the earnings report the company ranked first in completed mergers and acquisitions, and had the leader’s position in share offerings and IPOs.
Fixed income problems nowhere to be seen
Fixed Income, Currency and Commodities Client Execution, once an investor favorite at Goldman Sachs Group Inc (NYSE:GS) has been the subject of much doom-saying in recent years. The unique bond market has killed the fixed income revenues of many investment banks and Goldman was widely exposed to the market when it began its decline. Revenue in the segment came to $2.22 billion in the second quarter of the year, 10% lower than in the same three months of 2014.
Fixed Income revenue is declining at Goldman Sachs Group Inc (NYSE:GS), but it’s not causing the trouble that analysts assumed. The company has managed to increase its other business segments at a quicker rate, and its problems in the equities market have actually been greater than those in Fixed Income. According to the earnings report Goldman brought in $1.61 billion from its equities business, 13% lower than the same period last year.
The narrative of Fixed Income decline is not dying yet, but it may be past its prime. As more and more analysts begin to predict an end to the equity market bull run, investors will have to put their money somewhere. Despite the problems in the fixed income market, it’s likely to reap a certain amount of that surplus.