(Adds details from earnings release)
July 18 (Reuters) - Goldman Sachs Group Inc reported a 40 percent drop in bond trading revenue during its second-quarter earnings, mirroring a broader weakness in trading activity that has plagued big U.S. banks.
Overall revenue was roughly flat, however, as gains in investing and lending and asset management helped offset the trading slump, and the bank topped Wall Street earnings estimates.
Goldman's revenue from trading fixed income, currency and commodities fell to $1.16 billion from $1.93 billion the same quarter a year earlier, when trading activity had surged around the Brexit vote.
The fifth-largest U.S. bank by assets is typically more reliant on bond trading revenue than its peers and has remained committed to the business even as others backed away amid increased regulatory scrutiny since the 2007-2009 financial crisis.
Goldman's decline in bond trading was far worse than JPMorgan Chase & Co's 19 percent fall and Citigroup Inc's 6 percent drop, leading to Goldman's weakest fixed-income results since the fourth quarter of 2015.
Some of Goldman's other businesses performed better, including equities which rose 8 percent to $1.89 billion to mark its best results since the second quarter of 2015.
Investing and lending, which includes investments Goldman makes across the bank, jumped 42 percent.
The bank has been working to cut its reliance on trading and shift to more stable businesses like investment management. That division generated revenue of $1.53 billion, up 13 percent from the year-ago quarter.
Goldman's earnings per share rose to $3.95 as the number of shares outstanding fell nearly 6 percent. It topped analysts' average estimate of $3.39 per share, according to Thomson Reuters I/B/E/S.
Investment banking revenue fell 3 percent to $1.73 billion as dealmaking and capital raising slowed slightly.
The bank has also pushed into consumer lending, launching an online platform called Marcus in 2016.
The Wall Street bank's net income applicable to common shareholders was nearly flat at $1.63 billion in the quarter.
Total revenue, including net interest income, fell 0.6 percent to $7.89 billion.
Goldman's operating expenses fell about 2 percent to $5.38 billion.
The lender's return on equity was 8.7 percent. Analysts typically like to see a bank produce returns of at least 10 percent to meet its cost of capital.
Shares of Goldman, a Dow component, were down 0.6 percent in premarket trading.
The stock has been the worst performing among shares of the six large U.S. banks. Up to Monday's close, it had lost 4.3 percent in value this year, significantly underperforming the broader S&P 500 Financial Index, which has gained 6.7 percent.
The company's arch rival Morgan Stanley is expected to report results on Wednesday. (Reporting by Sweta Singh in Bengaluru and Olivia Oran in New York; Editing by Sriraj Kalluvila and Meredith Mazzilli)