Goldman Sachs Group reported a 21 per cent drop in quarterly profit as revenue from fixed-income trading fell in what chief executive Lloyd C. Blankfein described as “a somewhat challenging environment”.
The bank’s bond trading revenue slid 11 per cent, adjusted for an accounting charge, and was greater than those of competitors that have already posted fourth-quarter results. It is also a blow to a bank that counts bond trading, including fixed income, currency, and commodities, as one of its biggest businesses.
The bond market began to soften in the middle of last year as investors prepared for the US Federal Reserve to scale back on its bond-buying stimulus, and longer-term yields started rising.
Trading income across Wall Street has been hurt by the move.
Even accounting for the difficult environment, Goldman’s bond-trading results lagged peers.
Bank of America Corp’s fixed-income trading revenue rose 16 per cent in the fourth quarter to a level 10 per cent higher than Goldman’s.
Bond trading had arguably been Goldman’s strongest business in the decade leading up to the financial crisis as it raked in billions of dollars from the credit boom and bust.
While Goldman is still a big player in bond markets, fixed-income trading revenue fell to 25.3 per cent of total revenue in 2013.
Nonetheless, Goldman chief financial officer Harvey Schwartz sounded cautiously optimistic about the long-term trend.
“When you boil it all down, the 2013 environment is just one where the world took two steps forward followed by one step back, a dynamic which you could see reflected in both price movements in the markets, and client activity,” he said..
“To sum it up, while we wouldn’t characterise the last two years as a normal cyclical environment.”
Goldman pioneered a mentoring scheme to help Yorkshire companies to grow during the recession.
The Goldman Sachs 10,000 Small Businesses UK programme has been praised by Business Secretary Vince Cable.