Goldman Sachs hit by 38% plunge in Q3 profit

Goldman Sachs' results are the latest example of how a grim trading environment, exacerbated by worries about the global impact of China's economic slowdown, is gutting Wall Street.
Goldman Sachs' results are the latest example of how a grim trading environment, exacerbated by worries about the global impact of China's economic slowdown, is gutting Wall Street.PHOTO: REUTERS

NEW YORK • Goldman Sachs' profit plunged 38 per cent in the third quarter - its second straight quarterly drop - depressed by a steep decline in bond trading revenue triggered by concerns about global growth.

With the exception of investment banking, which benefited from a surge in takeovers, revenue fell in all of the bank's major businesses, from investment management to bond, currency and commodity trading.

The results are the latest example of how a grim trading environment, exacerbated in the most recent quarter by worries about the global impact of China's economic slowdown, is gutting Wall Street.

"We experienced lower levels of activity and declining asset prices during the quarter, reflecting renewed concerns about global economic growth," chief executive Lloyd Blankfein said on Thursday.

Goldman said revenue from fixed-income, currency and commodity (FICC) trading fell 33 per cent to US$1.46 billion (S$2 billion), the biggest year-on-year drop since the third quarter of 2013 when it was squeezed by concern about tighter monetary policy.

JPMorgan Chase, Bank of America and Citigroup have also reported falling revenue from bond trading, but as deposit-taking banks they are less dependent on such income than Goldman.

Citigroup, however, said on Thursday that after adjusting for certain debt valuations, its third-quarter profit surged 36 per cent, to about US$4.2 billion, compared with a year ago.

Both JPMorgan and Bank of America reported 11 per cent declines in FICC revenue, while Citi's revenue from the business fell about 16 per cent. Arch-rival Morgan Stanley will report its results on Monday.

"Investors sit it out in such a market. They don't trade," said analyst Erik Oja of S&P Capital IQ. "Unless such a market rout happens again, I would expect fourth-quarter trading revenues at the banks to improve, compared to third-quarter."

However, JPMorgan chief financial officer Marianne Lake offered little hope for a quick rebound, saying earlier this week that analyst estimates for the current quarter appeared to be too high in the light of slow market trading in the first two weeks of this month.

Goldman said its net income applicable to common shareholders fell 38 per cent to US$1.33 billion, or US$2.90 per share, from US$2.14 billion, or US$4.57 per share, a year earlier.

Net revenue fell 18.2 per cent to US$6.86 billion, far short of the average estimate of US$7.12 billion.

Goldman made no mention of Mr Blankfein's cancer in its results statement or on a later conference call. The long-time CEO said last month he had a "highly curable" form of lymphoma and would be able to work mostly as normal during treatment.

REUTERS

A version of this article appeared in the print edition of The Straits Times on October 17, 2015, with the headline 'Goldman Sachs hit by 38% plunge in Q3 profit'. Print Edition | Subscribe