Goldman taking a less risky route

Goldman Sachs surprised Wall Street yesterday, reporting better-than-expected profit and dialling back risk-taking in ways that are uncharacteristic for the traditionally aggressive investment bank.
By The Newsroom
Published 18th Apr 2012, 07:00 BST

In fixed income, currency and commodities trading (FICC) –where Goldman has been known for lucrative, if risky, bets – the bank highlighted interest-rate products as a bright spot and said other major businesses reported lower revenue.

Goldman’s average daily value at risk – a key measure of risk-taking at Wall Street banks – declined by 16 per cent from the year-ago period and 29 per cent from the 2011 fourth quarter.

Hide Ad
Hide Ad

In another move that made the Wall Street firm look a little more like the less profitable, run-of-the-mill commercial banks, Goldman raised its dividend 31 per cent to 46 cents per share.

It is only the third dividend increase since the bank went public in 1999. It last raised the dividend in 2006.

The shift toward a lower risk profile comes as Goldman and other investment banks have found their profits under pressure from continuing stress in the capital markets in recent years and new regulations aimed at reducing risk at such firms, including higher capital requirements, restrictions on trading, and curbs on investments in hedge funds and private equity.

But investors had been expecting Goldman to find ways to increase profitability and post even stronger results, especially after major rivals JPMorgan Chase & Co and Citigroup outperformed expectations in the first quar- ter.