GOLDMAN Sachs yesterday rattled investors with earnings that fell far short of analysts’ estimates because of sharp declines in trading revenue.
Goldman, once Wall Street’s largest bond trading house, reported its sixth consecutive quarterly decline in that business, making bond trading smaller than its traditionally low-margin equities trading business.
Its fixed income, currency and commodities (FICC) trading revenue fell 53 per cent from a year earlier to $1.6bn (£991m), far worse than analysts had expected. Compared to the first quarter, FICC revenue was down 63 per cent.
Overall, Goldman earned $1.05bn, or $1.85 per share, in the second quarter, far below the $2.27 per share analysts had forecast. Adjusted for special charges, Goldman earned $2.75 per share a year earlier.
Weak client activity and a lack of clear market direction have weighed on large Wall Street banks’ trading businesses for the past year. But unlike JP Morgan Chase and Citigroup, which posted better-than-expected trading results last week, Goldman does not have a commercial banking operation to fall back on.
“During the second quarter, the operating environment was more difficult given global macro-economic concerns,” Goldman chief executive Lloyd Blankfein said.“In addition, certain of our businesses had disappointing results as we reduced our market risk.”
On the bright side, Goldman's performance in investment banking, where it advises clients on mergers or debt and equity issuance, was strong, although not strong enough to make up for the trading declines. Investment banking revenues overall rose 54 per cent to $1.45bn.
Goldman shares fell 2.7 per cent shortly after the results.
City A.M. Reporter