Goldman Sachs’ Q2 Profit Tumbles

Mortgage-related litigation provisions weaken a strong quarter from investment banking and equities trading.
Katie Kuehner-HebertJuly 16, 2015
Goldman Sachs’ Q2 Profit Tumbles

Goldman Sachs on Thursday said that its second-quarter profit fell due to legal costs and lower trading revenue, particularly for debt, currencies, and commodities trading.

The New York investment banking company said that net income was halved from a year ago, to $1.05 billion, or $1.98 a share, due to a set-aside of $1.45 billion in provisions for “mortgage-related litigation and regulatory matters,” and a 6% drop in trading revenue, to $3.60 billion. In particular, revenue from debt, currency, and commodities trading fell 28%, to $1.60 billion.

Analysts polled by Thomson Reuters had expected earnings of $3.89 a share, according to Dow Jones.

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“The legal expenses marred what was a strong quarter for many of Goldman’s businesses, including investment banking and stock trading,” the WSJ wrote. “But the firm’s results had beaten estimates handily in the first quarter, and by July, many investors were betting that Goldman would do so again Thursday.”

“Expectations were pretty high,” UBS AG analyst Brennan Hawken told the WSJ.

Goldman is one of the remaining big U.S. banks that haven’t resolved federal and state investigations over crisis-era mortgage practices. The Justice Department and state officials have been readying settlements with up to nine U.S. and European banks, including Goldman, WSJ reported in June. Goldman is expected to pay more than $2 billion to resolve those claims, following the $2.6 billion in claims that Morgan Stanley agreed to pay the Justice Dept. earlier this year.