The first and second quarters of 2016 told two different stories for Goldman Sachs as far as earnings and overall business operations: in the first quarter, everything was down; in the second quarter, everything is back up.
According to the investment banking firm’s Q2 2016 earnings report released Tuesday, Goldman Sachs reported net earnings of $1.82 billion for Q2—an increase from $1.14 billion in the first quarter and from $1.05 billion in Q2 2015. Diluted earnings per common share in Q2 were $3.72, compared to $1.98 in the year-ago quarter and $2.68 for Q1 2016.
Whereas challenges presented headwinds to nearly all of Goldman Sachs’ businesses in Q1, things ran somewhat more smoothly in Q2. There were still challenges in Q2 however; low interest rates, political uncertainty about global growth continued to pose challenges to Goldman Sachs’ Fixed Income, Currency, and Commodities Client Execution segments.
“Despite the uncertainty created by Brexit, we achieved solid results by continuing to serve our clients across our diversified franchise and by managing our business efficiently,” said Lloyd C. Blankfein, Chairman and CEO of Goldman Sachs.
Also, Goldman Sachs announced in January that it had agreed to a $5 billion settlement in April with the Department of Justice over the sales of toxic mortgage-backed securities prior to the crisis; the settlement was made final in April. The firm reported net earnings of only $765 million in the fourth quarter of 2015 immediately after making the announcement about the settlement.
A major difference in the earnings of Goldman Sachs between the second quarter a year ago and Q2 this year was lower net provisions for litigation and regulatory proceedings for Q2 this year ($126 million). Last year during the second quarter, the firm recorded $1.45 billion in net provisions for mortgage-related litigation and other regulatory matters. Non-compensation expenses were $2.14 billion in the second quarter, a decline of 40 percent from Q2 2015 (and an increase of 2 percent from Q1 2016).
“The decrease compared with the second quarter of 2015 primarily reflected significantly lower net provisions for mortgage-related litigation and regulatory matters, which are included in other expenses,” the Q2 earnings report stated. “In addition, market development expenses were lower compared with the second quarter of 2015.”
Click here to see Goldman Sachs’ complete Q2 earnings report.