Goldman Sachs shares fall as profit barely rises

The world's largest investment bank by profit and market value on Thursday said net earnings rose 1 percent to $2.33 billion, or $4.93 a share, in the second quarter ended on May 25, from $2.29 billion, or $4.78 a share, a year earlier.

While earnings were about 4 percent higher than the analysts' average estimate of $4.76 a share, the results paled in comparison with the double-digit growth of previous periods.

Net revenue slipped 1 percent to $10.2 billion, just beating the average estimate, while Goldman routinely trounces expectations. Some analysts said earnings growth would have been even lower if not for reduced compensation and tax rates, and Goldman shares fell more than 3 percent.

"Goldman has historically beaten by so much, so people are bound to have high expectations," said Jim Huguet, president and co-chief executive at Great Companies Inc. in Tampa.

The mixed results come two days after Lehman Brothers reported a 27 percent jump in profit, surprising investors and sparking a rebound in broker stocks as the one-time bond shop benefited from expansion in new businesses.

"Goldman has been doing spectacularly for several quarters and this was only OK, and that's not OK with investors," said Ken Crawford, who helps run $850 million in separate accounts for Argent Capital Management in St. Louis.

MIXED TRENDS

Trading and principal investment revenue fell 6 percent to $6.65 billion, paced by a 24 percent drop in debt and commodities trading revenue, the bank's largest business. Goldman said rising defaults on risky home loans had hurt the mortgage business.

"Business trends during the quarter were mixed," Goldman Chief Financial Officer David Viniar said on a conference call. "Where equities recovered after a weak start, several businesses saw reduced volatility and risk appetite from our clients, compared with a very robust first quarter. At the same time, corporate and financial sponsor activity did accelerate to record levels."