Goldman’s Q3 revenue tumbles 20%
Print Edition
Goldman Sachs Group Inc yesterday said third-quarter revenue plunged 20 percent, hurt by weak mortgage and bond-trading results, but profit dropped only slightly as the Wall Street bank slashed compensation and other expenses.
Revenue from trading fixed-income, currency and commodity products for clients, one of the bank’s biggest businesses, plunged 44 percent, a much sharper decline than those posted by rivals. Goldman said revenue from investing its own money in bonds and loans dived 46 percent.
“Goldman showed that they are also mortal,” said Michael Holland, founder of Holland & Co, which owns financial stocks but not Goldman shares.
Banks across Wall Street were hurt in the third quarter by the Federal Reserve’s surprise decision to continue its bond buying stimulus instead of starting to wind it down.
Customer trading volume fell because the decision assured investors they could hold onto their bonds for longer without worrying about rising rates.
Goldman responded to the weaker revenue by cutting the money set aside for compensation by 35 percent, to US$2.38 billion. So far this year it has set aside US$10.4 billion to pay employees, down 5 percent from the first nine months of 2012.
Overall, Goldman reported net income for common shareholders of US$1.43 billion, or US$2.88 per share, down 2 percent from US$1.46 billion, or US$2.85 per share, a year earlier. Per-share earnings rose because of stock repurchases.
Analysts had been expecting earnings of US$2.43 per share, on average, according to Thomson Reuters. But analysts had forecast higher revenue, and most of Goldman’s earnings came from cost-cutting.
The bank boosted its dividend for the third time in under two years, to 55 cents per share quarterly from 50 cents. The dividend is a small expenditure for the bank, but Goldman is loathe to raise its payout if there are better options for it to invest the money elsewhere.
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