Goldman Sachs profit soars on bond trading and curtailed costs

Tue Oct 18, 2016 12:13pm EDT
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By Olivia Oran and Sruthi Shankar

(Reuters) - Goldman Sachs Group Inc (GS.N: Quote) reported a 58 percent jump in third-quarter profit on Tuesday as bond trading rebounded and the Wall Street bank managed to keep a lid on expenses.

Goldman reported nearly $2 billion in revenue from trading fixed income, currency and commodities, making it the biggest contributor to overall revenue.

Strong bond issuance and better conditions in credit and mortgage markets helped the bottom line, Chief Financial Officer Harvey Schwartz said on a conference call with analysts. But he noted that the business only seems to be doing so well because it performed so poorly in the year-ago period.

"It wasn't so much about tailwinds as it was about not having so many headwinds in the quarter," said Schwartz. "It translated nicely for us."

He noted that while credit and mortgage trading results were better, currencies were flat and rates declined slightly.

Goldman, the fifth largest U.S. bank by assets, has historically been more reliant on bond trading than its peers. That helped the bank earn big profits leading into the 2007-2009 financial crisis, but financial reform rules imposed since then have hindered the business.

In an effort to buoy profits, Goldman launched an efficiency program earlier this year, with the goal of reducing annual expenses by $700 million.

That program was evident in its third-quarter results, with operating expenses up just 10 percent, compared to a 19 percent rise in net revenue. Staff levels were down 5 percent compared to the third quarter of 2015.   Continued...

A view of the Goldman Sachs stall on the floor of the New York Stock Exchange July 16, 2013. REUTERS/Brendan McDermid/File Photo