Goldman Sachs saw summer trading breakdown

The champion trader of Wall Street experienced a slowdown that was sharper than expected and more severe than at other big banks.

By Forbes Digital Oct 17, 2013 3:12PM

For years, Goldman Sachs (GS) has been Wall Street’s champion trader, but this summer the investment bank experienced a breakdown in its trading machine.

Net revenues in Goldman’s fixed income, currency and commodities unit tumbled in the third quarter to $1.25 billion, down by 44% compared to the third quarter of 2012, when it was $2.2 billion. The bank said the drop reflected significantly lower net revenues in mortgages and interest rate products, as well as in currencies.

Wall Street had been well prepared for a drop off, especially after other big banks like Citigroup reported in recent days weakness in third-quarter fixed income trading revenue, but Goldman’s trading slowdown was sharper than expected and more severe than at other big banks.

"Fixed income, currency and commodities client execution operated in a challenging environment, which was characterized by economic uncertainty, difficult market-making conditions in certain businesses and lower levels of activity,” Goldman Sachs said in the third-quarter earnings release it put out on Thursday.

In other words, Goldman was thrown off its trading game as the Federal Reserve threw its summer head-fake about diminishing its massive bond buying program.

Goldman was unable to offset the trading decline in other areas like investment banking. In total, Goldman posted net revenue in the third quarter of $6.72 billion, down 20% from the third quarter of 2012.

Nevertheless, by cutting expenses Goldman Sachs was still able to report third quarter profits of $1.43 billion, $2.88 per share, compared to $1.46 billion and $2.85 per share in the third quarter of 2012. That won’t make Goldman employees too happy since compensation expense was one of the areas that was scaled back. The bank also increased its quarterly dividend to 55 cents per share from 50 cents per share.

Shares of Goldman Sachs traded more than 2% lower on Thursday.

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2Comments
Oct 17, 2013 4:12PM
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You live by the sword, you die by the sword!
Oct 17, 2013 7:18PM
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screw the wall street greed machine - ha ha ha!
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