Volatility hits Goldman Sachs’ profit
Goldman Sachs Group Inc. reported a 7 percent drop in fourth-quarter profit as an unexpected bout of market volatility in December hit its bondtrading business.
Fixed-income trading, long a strength for the bank, came under pressure last year due to stricter capital rules in the aftermath of the financial crisis and relatively calm markets that discouraged clients from trading.
Just when it seemed things were picking up, a burst of volatility last month caused by factors ranging from plunging oil prices to weak global economic data, spooked investors again.
Goldman said revenue from trading fixed-income securities, currencies and commodities, or FICC, fell 19 percent in the quarter, excluding gains from repayment of debt and the sale of most of its European insurance business in 2013.
Overall, FICC revenue fell 29 percent, to $1.22 billion, in the quarter, mainly because of a weaker performance in mortgages and credit products such as corporate bonds.
This was partially offset by higher revenue from trading commodities and currencies.
The business, which once contributed about 40 percent of Goldman’s revenue, has been on a decline since 2009 as new rules also discourage banks from trading on their own account and it accounted for only about 16 percent of revenue in the year’s final quarter.
JPMorgan Chase & Co.’s FICC revenue fell 14 percent in the quarter, Citigroup Inc.’s 16 percent and Bank of America Corp.’s 30 percent.
Investment banking revenue fell 16 percent, to $1.44 billion, due to lower revenue from both equity and debt underwriting.
Overall net income fell to $2.17 billion, or $4.38 per share, in the fourth quarter from $2.33 billion, or 4.60 per share, a year earlier. Analysts had expected earnings of $4.32 per share, according to Thomson Reuters I/B/E/S.