Goldman Sachs' 2nd-quarter earnings beat estimates as trading desks drive revenue spike

• Goldman Sachs reported second-quarter earnings Wednesday morning that beat analyst estimates for revenue and profit.
• Quarterly revenue posted its second-highest reading ever as trading businesses surged on heightened market volatility.
• Loan loss reserves reached $1.6 billion as the firm braced for credit-market fallout.
• "Our strong financial performance across our client franchises demonstrates the inherent benefits of our diversified business model," CEO David Solomon said.
• Goldman shares gained as much as 4.1% in early trading.
• Watch Goldman Sachs trade live here.

Goldman Sachs announced second-quarter earnings on Wednesday that beat analyst expectations and provided the first full-quarter look at its hit from the coronavirus pandemic.

The bank added $1.6 billion to its loan loss reserves over the period as credit health soured. The build-up led quarterly profit to fall 33% from the year-ago period. However, investors looked through the smaller-than-expected profit slump and focused on strong revenues across trading operations.

Goldman shares jumped as much as 4.1% in early Wednesday trading.

Here are the key numbers:

• Revenue: $13.3 billion, versus the $9.71 billion estimate
• Earnings per share: $6.26 per share, versus the $3.95 estimate
• Net interest income: $944 million, down 12% from the year-ago period

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"Our strong financial performance across our client franchises demonstrates the inherent benefits of our diversified business model," CEO David Solomon said. "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."

Goldman's revenue is more concentrated in deal advising and trading operations than any other major Wall Street bank. That focus helped the firm offset loan-loss pressures with strong performances across its trading divisions. Investment banking revenue reached a record $2.7 billion, up 55% from the year-ago period.

Equities revenue hit $2.9 billion, its highest in 11 years. Fixed-income sales and trading brought in $4.2 billion, its best reading in nine years as the Federal Reserve's bond-buying spree drove investors back into the corporate credit market.

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The company's latest figures follow a 46% profit decline in the first quarter driven by the pandemic's initial fallout. Battered earnings fell below analysts' already lowered expectations, but revenue trounced estimates as trading desks benefited from historic market volatility in February and March.

Goldman's earnings release follows beats from Citigroup and JPMorgan on Tuesday. Both firms beat expectations for revenue and earnings as trading and investment-banking incomes overshadowed credit reserve builds.

Wells Fargo fared worse in its Tuesday report. The bank posted its first quarterly loss since the financial crisis, with much of its profits diverted to $9.5 billion in credit loss protections. Analysts expected a build-up of about $4.9 billion. The firm's net interest income also fell below expectations as low rates cut into the critical profit stream.

Goldman closed at $214.01 per share on Tuesday, down 6.9% year-to-date.

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