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Goldman Sachs stock lifted by earnings beat, holds top dealmaking spot

Javier E. David
Editor focused on markets and the economy

Goldman Sachs (GS) posted second quarter earnings that beat Wall Street’s expectations, as a surge in investment and lending activity lifted its performance during Q2 and sent its stock higher in Tuesday’s trading.

The third major bank to report earnings this week, Goldman reported a quarterly profit of $5.81 per share on $9.46 billion of revenue, compared to the comparable year-ago quarter of $5.98 on $9.40 billion in revenue.

Analysts on average expected the investment banking giant to report an adjusted Q2 profit of $4.93 per share ($5.10 on a GAAP basis) on revenue of $8.8 billion, according to a Bloomberg consensus forecast.

The stock jumped by more than 1% in midday trade, changing hands above $215. Year-to-date, Goldman’s stock is up over 25%.

At least two of the bank’s major segments, investment banking, management and institutional client services, posted yearly declines in revenue. Net revenues in investment banking dropped 9% from 2018, to $1.86 billion.

However, Goldman saw a 16% year-over-year surge in investing & lending, which checked in at $2.53 billion for the second quarter. It also boasted keeping the top spot as the world’s biggest dealmaker in mergers and equity offerings, two of Goldman’s crown jewels.

“Given the strength of our client franchise, we are well positioned to benefit from a growing global economy. And, our financial strength positions us to return capital to shareholders, including a significant increase in our quarterly dividend in the third quarter,” CEO David Solomon said in a statement.

Goldman’s board also voted to increase its quarterly dividend to $1.25 per common share, up from 85 cents per share, payable on September 27.

The bank’s widely heralded shift toward consumer banking, which includes a credit card issued by Apple and its consumer banking segment Marcus, is costing Goldman a hefty sum. In a conference call, Goldman CFO Stephen Scherr said those Main Street-focused initiatives have cost the bank $1.3 billion to date.

In spite of widespread gloom over global growth, both Citigroup (C) and JPMorgan Chase, the largest U.S. bank by assets (JPM), beat market expectations in Q2.

Javier is an editor for Yahoo Finance. Follow Javier on Twitter: @TeflonGeek

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