US investment banking giant Goldman Sachs has missed expectations for its second-quarter profit growth as its trading revenue fell steeply, it has reported.
Goldman’s earnings came in at $1.05bn (£653m) for the quarter, below its rivals JP Morgan Chase and Citigroup, giving it earnings per share of $1.85.
While its earnings were still more than double the $453m it made in the second quarter of 2010, the figure was below analyst consensus expectations for earnings of $2.27 per share.
The miss was largely due to a 17.6 per cent slump in Goldman’s revenues o $7.3bn – far below the $8.1bn consensus market expectations.
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 trading revenue fell 53 percent from a year earlier to $1.6bn compared with the same quarter in 2010, far worse than analysts had expected. Compared to the first quarter, FICC revenue was down 63 per cent.
"What it makes me wonder is, what happened? Did they lose market share? It seems like Goldman and Morgan Stanley cannot compete with the big commercial banks," said Chris Whalen, an analyst who covers bank stocks for Institutional Risk Metrics, based in Los Angeles.
Unlike JPMorgan Chase and Citigroup, which posted better-than-expected trading results last week, Goldman does not have a commercial banking operation to fall back on.
However, it cut its expenses by more than a fifth compared with the 2010 period.