NEW YORK - Sometimes being lumpy has its advantages. Goldman Sachs reported earnings on Tuesday that, while lower than last year, beat expectations. Some volatile activities worked in its favor, muffling the effect of others that didn’t. Chief Executive David Solomon plans over time to reduce the impact of such wobbly businesses, but for now he’s presumably glad he didn’t.

Over half of Goldman’s revenue in the three months to the end of June came from what might be regarded as the more stable, predictable parts of finance. Interest income, advising and underwriting fees, commissions and investment management brought in a combined $5.2 billion. That, though, was less than the same period last year. Investment banking fees and revenue from managing clients’ money contracted at their fastest rate in three years. Moreover, the so-called client backlog – Goldman’s stack of deals-in-waiting – is shrinking.

Thank goodness for the unpredictable. Solomon’s best friends were private-equity investments, including a roughly $375 million gain from the initial public offering of Tradeweb Markets. Equities trading increased by 6% compared with a year earlier, while slumping by roughly a tenth at Citigroup and JPMorgan, which suggests Goldman’s relative skew towards fickle financial clients like hedge funds seems to have worked in its favor. Mercurial revenue streams like these increased by 4%, year-on-year, helping earnings per share of $5.81 comfortably outstrip consensus forecasts of $4.91, according to data from Refinitiv.

All that said, Solomon is on the right path trying to steer the $77 billion firm away from its dependency on volatile markets and flighty financial types. A more predictable business should also be more highly valued by investors, which would be no bad thing. Goldman only trades at just 0.9 times its net asset value, which suggests investors don’t think it can create value for them over time. The cure remains the same - it’s just that, this time round, the symptoms of Goldman’s condition were pretty benign.

CONTEXT NEWS

- Goldman Sachs on July 16 reported net income of $2.4 billion for the second quarter of 2019, equating to diluted earnings of $5.81 per share, almost 3% less than the previous year but higher than analyst forecasts of $4.91, according to data from Refinitiv. Revenue was $9.5 billion, a 2% fall from the same period last year.

- The Wall Street firm almost doubled its income from investment in equities. Within that was a roughly $500 million gain from holdings that went public during the quarter, including a gain of roughly $375 million from the initial public offering of Tradeweb Markets in April.

- Goldman Sachs’s trading revenue of $3.5 billion fell 3% from the second quarter of 2019. Equities trading revenue increased 6%, having fallen during the quarter for rivals JPMorgan and Citigroup, while fixed income was down 13%.

(Editing by Antony Currie and Amanda Gomez)

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