Goldman Sachs (NYSE: GS) earnings hit by tax, charges

Goldman Sachs (NYSE: GS) has reported a sharp fall in second-quarter profits after being hit by the UK’s bonus tax and charges. Net income came in at $ 613m (£404m), down from $ 3.4bn a year ago.


Earnings for Goldman Sachs fall 82% in the second quarter, socked by its settlement with the SEC and the U.K.’s payroll tax. Some opinions discuss the reasons why the Senate is poised to extend unemployment benefits for 2.5 million Americans after three previous attempts failed to gain sufficient Senate support.


The latest earnings were the lowest for the Wall Street giant since the fourth quarter of 2008, FactSet said. The investment-banking unit generated $ 917 million in net revenue, a decline of 36% from the second quarter of last year.


However, even ignoring the $ 600m accrued tax in the UK, and the US regulator’s record $ 550m fine, underlying profits fell by nearly half.
Fees from the financial-advisory business of the firm totaled $ 472 million in the quarter, up 28% from the same period last year. The backlog of transactions in the firm’s investment-banking business increased during the second quarter.


The result was driven by a drop in revenues from GAay, Apache Corp. (APA 87.02, -1.26, -1.43%) agreed to buy $ 7 billion worth of oil and gas assets from BP PLC (UK:BP. 387.65, -0.20, -0.05%) / (BP 35.58, +0.38, +1.08%) and announced plans to sell stock to finance the deal. Goldman was Apache’s lead adviser on the transactions.


Goldman shares rose 2.2% to close at $ 148.91 in Tuesday’s trades. The stock tacked on another 8 cents in after-hours action to trade at $ 148.99.
Goldman said quarterly profit slid to $ 613 million, or 78 cents a share, from $ 3.44 billion, or $ 4.93 a share, in the year-earlier period.


Excluding the $ 600 million impact of the U.K. tax and the $ 550 million SEC settlement, Goldman (GS 148.85, -0.06, -0.04%) said it would have earned $ 2.75 a share, fell 44% from a year ago. Analysts polled by FactSet Research expected earnings of $ 2.70 a share, on average.

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