Goldman Sachs Group’s profit plunged for the second straight quarter as bond trading revenue fell by a third amid market turmoil stemming from concerns about global growth.
Revenue fell in all of the bank’s major businesses except investment banking, which benefited from a surge in takeovers.
The results are the latest example of how the grim trading environment is gutting Wall Street.
Turbulent trading, much stemming from worries about the flow-on effect of China’s cooling economy, was aggravated by uncertainty over the timing of a US interest rate hike.
“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 yesterday.
Goldman, which released its results through its website instead of a press release service for the first time, said revenue from fixed-income, currency and commodity (FICC) trading, fell 33% to $1.46bn.
This was the biggest year-over-year drop since the third quarter of 2013, when markets began to worry that the Federal Reserve was about to start tightening monetary policy.
Goldman, whose shares were down 1% in morning trading, said its net income applicable to common shareholders fell 38% — to $1.33bn, or $2.90 per share, from $2.14bn, or $4.57 per share, a year earlier.
Analysts had expected earnings of $2.91 per share for the third quarter ended Sept. 30, according to Thomson Reuters I/B/E/S. Net revenue fell 18.2% to $6.86bn, far short of the average estimate of $7.12bn.
Return on equity fell to 7% from 11.8% in the same quarter last year — starkly below the 30% range the bank achieved before the financial crisis.
Goldman has stressed the bank’s commitment to trading, even as other banks have pulled back or exited the business to focus on less-volatile activities that require less capital. New rules aimed at improving the stability of the banking system also discourage banks from trading off their own balance sheets.
Still, FICC contributed just 21.3% to revenue in the latest quarter, compared with about 40% at its peak.
One bright spot was investment banking, where debt underwriting and M&A advisory stood out. Revenue in the unit rose 6.3% to $1.56bn.
Revenue from equities trading rose 9% to $1.75bn, matching the performance of JPMorgan. Citi’s revenue from the business rose 31%, however, while Bank of America’s increased 12%.
However, Goldman’s equity underwriting revenue experienced its weakest quarter in three years, more than halving to $190mn as many firms delayed going public in a stormy market.
The bank spent 16% less on employee compensation in the quarter.