Goldman's 2Q profit soars on strong bond trading revenue

NEW YORK: Goldman Sachs Group Inc's quarterly profit soared 78 percent, handily beating expectations, as the Wall Street bank earned more from bond trading and debt underwriting. Revenue from trading fixed income, commodities and currencies jumped 20 percent to $1.93 billion in the second quarter while total revenue from trading rose 2 percent to $3.68 billion.

Investors have been watching Goldman's fixed income unit closely. The company has said it remained committed to the business even as rivals like Morgan Stanley (MS.N) have shrunk their operations. Fixed income businesses have been squeezed across Wall Street as regulations enacted after the financial crisis have made trading less profitable.

Several banks that have already reported second-quarter results posted increases in revenue from units that trade bonds, currencies and commodities, driven in part by trading activity around the extraordinary British vote last month to leave the European Union, otherwise known as Brexit.

Fixed income revenue rose 35 percent at JPMorgan Chase & Co, 14 percent at Citigroup Inc and 22 percent at Bank of America Corp. Goldman's total operating expenses fell 25.5 percent to $5.47 billion. The bank, like other Wall Street firms, has been trying to cut costs as concerns over slowing growth in China and other major markets has discouraged dealmaking and trading. "Despite the uncertainty created by Brexit, we achieved solid results," Chief Executive Officer Lloyd Blankfein said in a statement. Investment banking revenue fell 11 percent to $1.79 billion, although debt underwriting revenue jumped 20 percent from a year to $724 million to its second best quarterly performance ever. Goldman has been trying to strengthen its position in debt underwriting. Return on equity improved to 8.7 percent from 4.8 percent a year ago, but was still below the 10 percent that investors typically believe is needed to cover the cost of capital.