Goldman Sachs burned by bad currency bets in third quarter

Wed Nov 20, 2013 7:22pm EST
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By Lauren Tara LaCapra and Cezary Podkul

NEW YORK (Reuters) - Goldman Sachs Group Inc lost more than $1 billion on currency trades during the third quarter, recent regulatory filings show, offering some insight into why the firm, considered one of Wall Street's most savvy traders, reported its worst quarter in a key trading unit since the financial crisis.

Foreign exchange was the only trading area that was a money loser, according to regulatory data. In the third quarter, Goldman reported its weakest revenue - $1.3 billion - in fixed-income, currency and commodities trading since the height of the financial crisis.

The data, which come from regulatory filings with the U.S. Securities and Exchange Commission and the Federal Reserve, are reported in aggregate and do not always reflect the way banks tally up their own profits and losses on trading desks.

Goldman Sachs exchanges foreign currencies for clients, some of whom also pair the currency trades with trading designed to hedge interest-rate moves. But that type of currency trading at Goldman is separate from the performance of its currency trading business, which is headed globally by Guy Saidenberg.

Goldman's currency-trading problems came from the way the bank had positioned itself in emerging markets, two sources familiar with the matter said.

Specific positions could not be learned, but the bank was anticipating that the Federal Reserve would begin winding down its monetary-easing programs, the sources said. When the Fed unexpectedly announced that it would keep its massive bond-buying program in place, Goldman was left with positions that, "absolutely got annihilated," as one person familiar with the matter put it.

Goldman spokesman Michael DuVally declined to comment.

According to Fed data, Goldman had negative revenue of $1.3 billion in currencies, while JPMorgan Chase & Co was $65 million in the red. Morgan Stanley reported $594 million in currency revenue, Citigroup Inc reported $558 million and Bank of America Corp reported $215 million.   Continued...

A Goldman Sachs sign is seen over their kiosk on the floor of the New York Stock Exchange, April 26, 2010. REUTERS/Brendan McDermid