NEW YORK (TheStreet) - Goldman Sachs' (GS) far better-than-expected second-quarter earnings are a quagmire for the entire financial services industry. Recovering markets across all asset classes continue to do little to help the shares of Goldman and other large securities firms, which have all dramatically underperformed a stock market recovery since the financial crisis.
In Goldman's case. the quagmire is especially acute. The bank's revenue, earnings and compensation all benefited from near-record upward marks to the firm's $65 billion "Investing & Lending" portfolio of private equity, debt and equity investment. Still, Goldman Sachs shares barely reacted to the firm's earnings results, which came in about 30% ahead of Wall Street consensus.
Goldman earned $4.10 a share on revenue of $9.13 billion, 32% ahead of consensus estimates of $3.09 in EPS and a rise in revenue when analysts had expected a drop. The firm did benefit from better-than forecast investment banking revenue of $1.78 billion, strong trading revenue of $3.83 billion and in-line asset management revenue of $1.44 billion.
But, once again, it was Investing and lending gains that drove the bulk of Goldman's earnings beat.
The firm's Investment & Lending division earned $2.07 billion in revenue, a 46% rise from year-ago levels, helping the company to an unexpected 6% rise in overall revenue. Those Investment & Lending results were nearly $600 million ahead of estimates from Bernstein, Nomura, Wells Fargo, Barclays Capital & Deutsche Bank compiled by Bloomberg.