Goldman Sachs second-quarter earnings drop on legal costs

Goldman Sachs posted a sharp decline in second-quarter earnings as it took a hit from weaker revenue and litigation costs.

The investment bank reported earnings per share of $1.98, down from $4.10 in the same period a year ago. Profit came in at $1.05bn compared with $2.04bn in 2014, while revenue nudged down to $9.07bn from $9.13bn.

During the quarter, the bank recorded $1.45bn in net provisions for mortgage-related litigation and regulatory matters. It said these provisions reduced diluted earnings per common share by $2.77.

Excluding the legal costs, EPS was $4.75.

Analysts were expecting EPS of $3.89 on revenue of $8.78bn.

Revenues from the investment banking business came in at $2.02bn, up 13% from the second quarter of last year, while revenue from its financial advisory business was up 62% from last year at $821m.

Revenue from trading fell 6% to $3.60bn due to a decline in sales on fixed income, currency and commodities trades.

Societe Generale said that adjusted back for the $2.77 of litigation provisions, EPS was 24% ahead of consensus.

However, it said there was a question mark over the quality of the EPS beat.

“We will be seeking to establish if GS benefitted from the litigation charge being tax deductible, which of course would imply that the EPS beat was not as strong as first seems.”

SocGen rates the stock at ‘sell’ with a $149 price target.

At 15:19, Goldman shares were down 0.9% at $211.06.