Highlights from Goldman Sachs (GS) Q2 Conference Call: Crushed Estimates, But Not Out of The Woods Yet

Earlier today, Goldman Sachs (NYSE: GS) reported Q2 EPS of $4.93, up 7.6% from the $4.58 reported in the same quarter last year and versus the analyst estimate of $3.54. The non-GAAP number has came in at $5.71. Revenue for the quarter was $13.8 billion, versus the consensus of $10.66 billion.

Highlights from Goldman Sachs Q2 conference call:

• Return on common equity was 23.8%
  
• Q2 performance was driven by higher contribution by its credit and currencies businesses.
  
• Equity underwriting produced record quarterly net revenues of $736 million, surpassing the previous record set in the second quarter of 2000.
  
• Investment banking produced net revenues of $1.4 billion, up 75% from Q1. Q2 advisory revenues were $368 million, down 30% from Q1.
  
• FICC net revenues were $6.8 billion in Q2 representing a 4% increase from Q1.
  
• Operating environment for several of its businesses including M&A advisory and security services remains challenging.
  
• Q2 results were negatively impacted by approximately $700M of fair value losses associated with commercial real estate loans within FICC.
  
• Benefiting from having virtually no direct exposure to the retail consumer business.
  
• Maintained a liquidity pool averaging $170 billion during the quarter.
  
• Goldman Sachs' FICC performance continued to be driven by historicallywide margins, strong market share and a focus on more liquid, plain vanilla transactions.
  
• Commodities revenue were solid but down sequentially on lower customer levels.
  
• Equities net revenues for Q2 was $3.2 billion up 59% sequentially. Equities trading net revenues were up over 100% as equity values increased leading to more active new issue market and higher customer volumes along cash trading and derivatives.
  
• Turning to risk, average daily value of risk in Q2 was $245 million, up modestly due to increase in equity bar offsetting a decrease in interest rate bar.
  
• Goldman Sachs has a lot more cash than it has debt maturities coming due. It's not forced to issue debt for quite awhile if it doesn't want to.
  
• Goldman says if markets stay okay and stay receptive, there will likely be a lot more equity offerings this year so companies can rebuild their balance sheets.
  
• Goldman's David Viniar said that if the markets stay stable, there will likely be a big uptick in M&A activity. Viniar added, that if the markets stay stable and CEO confidence gets a little better as well, there will be an uptick in deals in the next few quarters.
  
• Going to manage things conservatively because the environment is still a very tricky environment, and GS said we're way far away from being out of the woods.

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