Goldman Sachs records 50% fall in bond trading revenue
Goldman Sachs reported a net loss for its fourth quarter, due to the repatriation charge for bringing overseas profits back to the United States, a policy introduced by the Trump administration.
The repatriation charge will be a one-off cost to bear, so of more concern will be the dramatic drop in Goldman Sachs performance for bond trading revenue. The investment banks’ trading revenues in the currency, commodities and critical fixed income space took a dive of 50 percent compared with a year ago. Overall, trading revenue saw a decline of a less but still substantial 34 percent.
The poor performance has coincided with Goldman Sachs’ restructuring and strategic move away from what have long been its core trading activities. The numbers, combined with the forecast of a higher than expected effective tax rate, led to a share price drop of 2 percent.
Speaking to CNBC Gerard Cassidy, managing director at RBC Capital Markets, described the FICC trading performance as “shocking” due to it being so much worse than Goldman Sachs’ competitors.
In an effort to calm investors and quell concerns, Goldman Sachs published a news release which attributed the bank’s poor trading revenues to “a challenging environment characterized by low levels of volatility and low client activity”.
Lloyd C. Blankfein, Goldman Sachs chairman and CEO, was also keen to emphasise that the bank had delivered “higher overall revenue and stronger pre-tax margins” despite the challenging market conditions.
Goldman Sachs did exceed Wall Street estimates in terms of its fourth-quarter earnings of $5.68 per share, and also reported $7.83 billion overall revenue, beating estimates of $7.61 billion.
Goldman’s investment banking operations recorded $2.14 billion in net revenues for Q4 and $7.37 billion for the year. Investment management produced $1.66 billion for Q4, and $6.22 billion for the year, a 7 percent increase.
Blankfein went on to add, “With the global economy poised to accelerate, new U.S. tax legislation providing tailwinds and a leading franchise across our businesses, we are well positioned to serve our clients and make significant progress on the growth plan we outlined in September.”