Goldman Sachs jumps after strong fixed income results drives big 2nd-quarter earnings beat

• Goldman Sachs jumped 4% Monday after it reported an earnings beat in the second-quarter.
• The investment bank reported Q2 earnings per share of $7.73, beating estimates by $1.08.
• Goldman's earnings beat was driven by strong results in its fixed income trading division.
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Goldman Sachs stock jumped as much as 4% on Monday after the investment bank beat revenue and income estimates in its second-quarter earnings report.

The bank saw a substantial year-over-year surge in trading revenue, driven by strong results in its fixed income, currencies, and commodity division. Those gains helped offset weak results in investment banking revenue, which has been hurt as the IPO market virtually shut due to an ongoing bear market in stocks.

Here were the key numbers:

Revenue: $11.9 billion, versus analyst expectations of $10.7 billion
Earnings per share: $7.73, versus analyst expectations of $6.65
Provision for credit losses: $667 million, compared to a net benefit of $92 million in Q2 2021

Goldman's Global Markets business, which represented more than half of its overall revenue, jumped 32% year-over-year to $6.47 billion in the quarter. Those results were driven by a 55% surge in Goldman's fixed income, currencies, and commodities trading division, as the bank was able to take advantage of ongoing volatility in interest rates. Meanwhile, revenue from the bank's equities division within Global Markets rose 11% to $2.86 billion.

Goldman's investment banking revenue fell 41% to $2.14 billion, as IPO underwriting significantly slowed down amid an ongoing bear market in stocks and interest rate hikes from the Federal Reserve. Asset management revenues fell 79% to $1.08 billion, reflecting net losses in equity investments and lower revenues from lending and debt investments.

But strength in Goldman's consumer and wealth management division also helped offset the revenue decline seen in investment banking and asset management. The firm's wealth management division saw revenue jump 25% to $2.2 billion, in part driven by higher management fees and higher assets under management.

Goldman also reported a spike in its provision for credit losses in the first quarter to $667 million, mainly due to rising consumer credit card balances and the impact of macroeconomic and geopolitical concerns. Goldman's provision for credit losses was $561 million in its first quarter.

Operating expenses fell 11% to $7.65 billion. The decrease reflects lower compensation and benefits expenses for its employees, as well as lower net provisions for litigation and regulatory proceedings.

The strong results allowed Goldman to raise its quarterly dividend by 25% to $2.50 per share. Additionally, the bank purchased $500 million of common shares during the quarter.

"We delivered solid results in the second quarter as clients turned to us for our expertise and execution in these challenging markets. Despite increased volatility and uncertainty, I remain confident in our ability to navigate the environment, dynamically manage our resources and drive long-term, accretive returns for shareholders," Chairman and CEO David Solomon said.