Goldman profit plunges as market turmoil hits bond trading

Thu Oct 15, 2015 4:29pm EDT
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By Richa Naidu and Olivia Oran

(Reuters) - Goldman Sachs Group Inc's (GS.N: Quote) profit plunged 38 percent, its second straight quarterly drop, depressed by a steep decline in bond trading revenue triggered by concern 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 commodities 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 a Chinese 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 in a statement on Thursday.

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

JPMorgan Chase & Co (JPM.N: Quote), Bank of America Corp (BAC.N: Quote) and Citigroup Inc (C.N: Quote) also have reported falling revenue from bond trading, but as deposit-taking banks they are less dependent on such income than Goldman.

Both JPMorgan and Bank of America reported 11 percent declines in FICC revenue, while Citi's revenue from the business fell about 16 percent. Arch-rival Morgan Stanley (MS.N: Quote) will report results on Monday.

"Investors sit it out in such a market. They don't trade," said Erik Oja, an analyst at 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 CFO 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 light of slow market trading in the first two weeks of October.   Continued...

A Goldman Sachs sign is seen above the floor of the New York Stock Exchange shortly after the opening bell in the Manhattan borough of New York January 24, 2014.  REUTERS/Lucas Jackson