Goldman Sachs Group Inc. reported a surprise increase in second-quarter profit as fixed-income revenue fell less than many analysts projected and investment-banking fees rose.
Net income climbed 5 percent to $2.04 billion, or $4.10 a share, from $1.93 billion, or $3.70, a year earlier, the Manhattan-based company said Tuesday in a statement. That beat the $3.09 average estimate of 25 analysts in a Bloomberg survey.
Chief executive Lloyd C. Blankfein, 59, has pledged not to overreact to a trading slump that's now in its fifth year as he positions the firm to pick up market share from other banks that are pulling back. Blankfein is also relying on underwriting stocks and bonds, which accounted for 14 percent of revenue in the second quarter, the highest portion since 2000. First-half investment-banking fees climbed to a record.
"We've got a strong beat here, primarily revenue-driven, and Goldman is a little more resilient than expected," Devin Ryan, an analyst at JMP Group Inc. in Manhattan, said in a telephone interview.
In early trading Goldman Sachs climbed 1.2 percent to $168.96. The stock has dropped 5.8 percent this year through Monday, making it the worst performer in the Dow Jones industrial average.
Revenue rose 6 percent to $9.13 billion. Compensation, the firm's biggest expense, climbed to $3.92 billion, or 43 percent of revenue, the same percentage as a year earlier.
Fixed-income, currency and commodity trading revenue was $2.22 billion, surpassing estimates of $1.79 billion from Brad Hintz, an analyst at Sanford C. Bernstein & Co., and $2.1 billion from Jason Goldberg at Barclays PLC.
The 9 percent second-quarter drop in bond-trading revenue, excluding an accounting adjustment, beat the 24 percent decline predicted by Matthew Burnell, an analyst at Wells Fargo & Co.
Goldman Sachs president Gary Cohn, 53, said in May that the current environment is "abnormal" and features trading clients that are the least active in years. He noted that the 10-year Treasury yield maintained the smallest range in 35 years in the three months ended in May.
"If markets never move or don't move, our clients really don't need to transact," Cohn said.
The firm has cut 10 percent of its fixed-income workforce since 2010 and reduced the risk-weighted assets in that business by $90 billion in the past two years. It has also relied on other businesses for growth.
Second-quarter revenue from investment banking, the business run globally by Richard J. Gnodde, David M. Solomon and John S. Weinberg, climbed 15 percent to $1.78 billion. That compared with JPMorgan's $1.77 billion in investment-banking revenue and Citigroup's $1.34 billion.
The Goldman Sachs figure included $506 million of financial-advisory revenue, including fees for takeover advice, an increase of 4 percent. Revenue from underwriting climbed to $1.28 billion in the quarter, including $730 million from debt underwriting and $545 million for equity offerings.