In rare fumble, Goldman stuns Wall Street with weak trading

Tue Apr 18, 2017 5:25pm EDT
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By Olivia Oran and Sruthi Shankar

(Reuters) - Goldman Sachs Group Inc (GS.N: Quote) fell short of earnings expectations on Tuesday due to a drop in quarterly trading revenue, prompting analysts to demand explanations for underperformance in an area where the bank usually outshines rivals.

Newly appointed finance chief R. Martin Chavez said Goldman's clients traded less with the bank because markets were calmer and because it does not lend as much as competitors. Banks with bigger balance sheets, like JPMorgan Chase & Co (JPM.N: Quote), tend to profit not only from financing corporations but from capturing hedging and other markets-related business as well.

"We underperformed this quarter," he said on a conference call with analysts.

Analysts seemed unsatisfied with explanations from Chavez and outgoing CFO Harvey Schwartz. They were unusually tough during a Q&A session, with all but one of six pressing management about trading results, especially in fixed income.

Goldman's 2 percent decline in trading revenue came in sharp contrast to results from JPMorgan Chase & Co (JPM.N: Quote), Citigroup Inc (C.N: Quote) and Bank of America Corp (BAC.N: Quote), which all beat estimates due to strength in trading.

Credit Suisse analyst Christian Bolu said Goldman investors were showing some "nervousness" about the strength of the business, and UBS's Brennan Hawken chastised the performance, saying that topping the prior year should have been "kind of easy."

"I'm not fully - I'm still confused," said Hawken, adding, "I have some company."

Goldman's shares tumbled 4.8 percent to $215.44.   Continued...

FILE PHOTO - A sign is displayed in the reception of the Sydney offices of Goldman Sachs in Australia, May 18, 2016.    REUTERS/David Gray/File Photo