Goldman Sachs posts revenue of $9.07B vs $8.78B expected

Goldman Sachs' Q2 beats Street estimates
Goldman Sachs' Q2 beats Street estimates

Goldman Sachs on Thursday posted quarterly earnings that fell sharply from the previous year, hit by a large litigation charge.

Goldman's stock fell about 1 percent in premarket trading after releasing its earnings results. (Get the latest quote here.)

The investment banking giant posted second-quarter earnings of $1.98 per share, down from $4.10 a share in the year-earlier period. The results were hurt by a $2.77 a share charge for litigation costs.

"During the quarter, the firm recorded $1.45 billion in net provisions for mortgage-related litigation and regulatory matters," the company said.

Revenue slipped to $9.07 billion from $9.13 billion a year ago.

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Analysts polled by Reuters expected the company to deliver second-quarter results of $3.89 per share on revenue of $8.78 billion.

Nevertheless, Vining Sparks Director of Bank & Equity Strategies Marty Mosby said Thursday the company remains an attractive investment.

"If you look exclude the litigation, because it is a capital issue and not an earnings issue, operating earnings are $4.75 [per share]. We're moving into record-high earnings of about $22 [per share], which is what we expect and is significantly above what the market consensus had been going into the year," Mosby said in a CNBC "Squawk Box" interview.

Goldman's stock has outperformed the broader S&P 500 financial sector during the past year. In that time, it has risen about 25 percent while the sector has increased 9 percent.

On Monday, Goldman said it would acquire Imprint Capital, a San Francisco-based asset management firm, for an undisclosed amount.

As with its competitors, Goldman's trading business—long a strength for the Wall Street bank—came under pressure as worries about Greece and China made investors reluctant to trade.

Net revenue from trading fixed-income securities, currencies and commodities (FICC) fell 28 percent to $1.60 billion.

"FICC was a large miss and we believe this will likely cause consensus (earnings) estimates to move lower, or at best stay flat," KBW analyst Brian Kleinhanzl wrote in a client note.

JPMorgan Chase's FICC revenue fell 10 percent during the period on an adjusted basis, while Bank of Americas fell 9.3 percent.

The business, which once contributed about 40 percent of Goldman's revenue, has been under pressure since the financial crisis as new rules discourage banks from trading off their own balance sheet and regulators demand that banks boost capital.

Other banks have shifted away from trading to focus on less-volatile businesses like wealth management, but Goldman executives have stressed the bank's commitment to trading.

Still, the business accounted for only about 18 percent of revenue in the quarter.

"While uncertainty in the EU weighed on investors' level of conviction, many of our businesses continued to benefit from generally improving economic conditions," Chief Executive Lloyd Blankfein said in a statement.

Investment banking revenue, which includes advising on deals and underwriting debt and stock offerings, rose 13 percent to $2.02 billion.

Goldman ranked No. 1 in global mergers and acquisitions as well as in equity underwriting in the first half of 2015, according to Thomson Reuters data.

Citigroup, which also reported on Thursday, said its quarterly profit rose as restructuring and cost cuts paid off and legal expenses plunged.

Goldman's traditional arch rival, Morgan Stanley, reports earnings on Monday.

The bank, whose shares were down 0.6 percent in premarket trading, said revenue fell nearly 1 percent to $9.07 billion.

Operating expenses rose 16 percent to $7.34 billion, while total non-compensation expenses rose 48 percent to $3.53 billion.

Reuters contributed to this report.