GOLDMAN Sachs shocked investors by reporting the second-ever quarterly loss in its history as a public company yesterday.
The bank’s net income plunged to a $428m (£273m) loss, with pre-tax profits falling from $2.8bn last year to a $730m loss in the third quarter of this year. Chief executive Lloyd Blankfein admitted he was “disappointed”.
The bottom line was hit particularly hard by drops in the value of Goldman’s proprietary investments: its investing and lending division lost $2.48bn versus a gain of $1.8bn in the same period of 2010.
The biggest contributor to the loss was a drop in the value of its investment in Commercial Bank of China, which alone cost Goldman $1.05bn.
The investment bank also suffered from revenues melting away as investors sat on their hands. Revenues from equity underwriting plunged by 71 per cent and in debt underwriting, the bank brought in just under half of the income generated last year.
But secondary trading activity is also down in the bank’s largest division: top-line income in fixed income, commodities and currencies fell off by 36 per cent to $1.73bn.
The lacklustre performance saw bonus pots and staff numbers drop sharply: the cost of paying the bank’s staff dropped 59 per cent to $1.58bn, in line with the 60 per cent drop in overall revenues.
As part of a costs crackdown, Goldman cut four per cent of its employees, bringing its headcount down to 34,200 and recording average annualised pay of $185,000.
City A.M. understands that the bank has assured some bankers in its London office that there will not be mass lay-offs in the City, but not all of its staff are convinced and some fear that large-scale UK job cuts could come down the line in addition to shrinking bonus payments.