Goldman Q2 profit halves but beats estimates as fixed-income trading shines

Goldman Sachs Group Inc on Monday reported a smaller-than-expected 48% slump in second-quarter profit, buffered by the strength in its fixed-income trading as investors realigned their bets amid heavy market fluctuations.

Revenue at the global markets unit, which houses Goldman's trading desks, jumped 32% to $6.47 billion, with fixed income, commodities and trading revenue surging 55% and equities revenue adding 11%.

This helped the bank offset a hit to investment banking business due to a plunge in underwriting activity and deals as a risk-averse sentiment gripped global markets.

Its quarterly report rounds off earnings from big banks and mirrors peers JPMorgan Chase & Co and Morgan Stanley, both of which saw weak revenue from investment banking.

Investment banking revenue fell 41% to $2.14 billion in the quarter. Revenue from both equity and debt underwriting fell along with those from advising on stock listings and mergers and acquisitions.

The bank's net revenue fell 23% to $11.86 billion for the second quarter and profit nearly halved to $2.8 billion, or $7.73 per share.

Runaway inflation and rising borrowing costs to stamp it out have rattled global financial markets, forcing corporates to curb their appetite for merger deals, while also slowing their efforts to raise cash through stock or debt offerings.

In the second quarter, the global market for initial public offerings saw 305 deals raising $40.6 billion in proceeds, down 65% from last year, according to data from Ernst & Young's report.

Also, the value of announced deals dropped 25.5% year-on-year to $1 trillion in the quarter with M&A activity in the United States plunging 40%, according to Dealogic data.

JPMorgan Chase & Co's investment banking revenue was $1.4 billion, down 61% on the year-ago-quarter, largely driven by a 54% drop in fees, while Morgan Stanley had reported a 55% fall in investment banking revenues.

Asset management was another weak spot for Goldman, with net revenue of $1.08 billion, 79% lower than the second quarter of 2021.

Provision for credit losses was $667 million for the second quarter of 2022, compared with a net benefit of $92 million in the second quarter of 2021.