Goldman Sachs surpasses Q2 earnings expectations

In its second quarter of the year, Goldman Sachs reported earnings that surpassed expectations. The earnings expectations were beaten on expense cuts and an upsurge in bond trading.

Goldman Sachs group was popularly assumed to be destined for a down quarter due to the increased risk perceived by investors. In addition to the perception of increased risks, other factors in the belief that Goldman would be down included the slowed down corporate merger, dwindling acquisition activity, and a stalled public offering market. The low expectations for Goldman’s Q2 earnings were deepened further by an ongoing aura of uncertainty created by Brexit.

Against the writing on the wall, Goldman Sachs Group has undertaken a strategy of shrinking down and building its foundation from the bottom-up. The shrinking strategy worked in the investment bank’s favor, as on Tuesday morning, the second quarter report showed far higher earnings than many had initially anticipated.

Goldman Sachs’ revenue reports were $7.93 billion and $1.82 billion profit, at $3.72 a share; by contrast, the expectations were for $7.5 billion in revenue at $3.72 per share.

While the earnings are still 13% lower than the revenues reported at the same time last year, the rise in profitability still took many investors by surprise. Goldman Sachs CEO Lloyd C. Blankfein credited the investment bank’s successful Q2 earnings to a strategy focused on serving clients across a “diversified franchise”.

Goldman Sachs Does Well But Cuts Bonuses

Goldman Sachs, one of the most renowned Wall Street investment banks, just announced its quarterly earnings. In the second quarter, the results were better than expected. The net income has risen to $1.82 billion from $1.05 billion a year ago. However, this is due to last year’s depressed earnings after Goldman applied $1.5 billion charge for a settlement regarding mortgage backed securities, the infamous financial instruments that led to the 2008 financial collapse.

Even though the revenue dropped from slightly over $9 billion year ago to less than $8 billion now, the earnings were $3.72 per share, which is better than $3 that most analysts expected.

Yet, Goldman Sachs is seeking to tighten its belt. When it comes to compensation charges, the company allocated $3.3 billion to them in the second quarter, while it was $3.8 billion a year before. This represents $96,000 per employee, down from $110,000 CNN Money reports.

In the first quarter of 2016, the bonuses were decreased by about 40%, but still were, on the average, over $70,000 per employee. Overall, the bank’s operating costs decreased by 26%.

A major reason for these cutbacks is recent 17% drop in investment banking revenues. Speaking of company’s performance, Goldman’s CEO Lloyd Blankfein claimed he’s pleased with the results. When it comes to the investors, their feelings must be mixed- the stock is down 10% since the beginning of this year.