Goldman's income jumps but still misses estimates

NEW YORK — Goldman Sachs's earnings more than doubled in the second quarter, but a slump in its bond trading business kept its bottom-line results well below what analysts were expecting.

The investment bank earned $1.05 billion in the three months ending in June, up from $453 million in the same period a year ago. Per-share earnings were $1.85, well below the $2.35 analysts surveyed by FactSet were expecting. Year-ago earnings per share were 78 cents.

The bank's shares lost 3.1 percent to $125.44 in pre-market trading.

The bank's troubles were largely due to a sharp drop in bond and currency trading, as clients held back because of worries over the European debt crisis and a possible downgrade of the U.S. government's debt rating.

Rivals JPMorgan Chase & Co. and Citigroup Inc. also posted declines in bond and currency trading, but the impact was bigger at Goldman, which relies on trading as a key portion of its revenue. Goldman's revenue from bond and currency trading plunged 53 percent, to $1.6 billion from $3.4 billion. Goldman also lost money on its investment in the Industrial and Commercial Bank of China Ltd.

Revenue fell 18 percent to $7.3 billion. That missed analysts' expectations of $8.2 billion.

There were bright spots for the investment bank, where revenue soared 54 percent on mergers and acquisitions and underwriting for other deals.

Goldman has done relatively well throughout the financial crisis and its aftermath, earning a profit every quarter except for three months in late 2008. At the same time the bank has been a lightning rod for wrath from the public and lawmakers, who see the storied investment bank as a symbole of risky practices in the banking industry that led to the financial crisis.

Goldman was able to increase net income even as revenue fell because it cut costs, though it didn't give many details. It set aside $3.2 billion for employee pay, 16 percent less than a year ago. Other expenses were down 18 percent, though that was partly because Goldman had to pay a record fine to regulators last year to settle charges that it misled investors about mortgage securities.

Last month the bank said that it could lay off more than 200 employees, citing economic reasons, beginning later this year.