Goldman Sachs missed out on the interest-income avalanche that boosted peers. Its trading revenue sagged while CEO David Solomon’s consumer push is still losing money. Where rising rates are a gift to rivals, Goldman needs the opposite, says johnsfoley.
Meanwhile, rising rates have tamped down risk-taking by corporate bosses and private equity firms, with dismal results for Goldman’s investment bankers. They contribute around a quarter of his revenue in a good year, more than twice the share at JPMorgan or Citigroup. Trading securities didn’t help it much this quarter either, with a 17% drop in fixed-income securities revenue – which looks worse than it is because Goldman’s commodity desk was booming this time last year.
Aside from his consumer-banking U-turn, Solomon isn’t to blame for the forces holding Goldman back. It’s just that, right now, the areas where the bank excels look better when rates are low and high-yielding investments of the kind it peddles are hard to find. Solomon wants to remold Goldman as a bank for all seasons, but he isn’t there yet.Goldman Sachs reported $3.
The Wall Street firm said revenue was $470 million lighter because of a partial sale of loans made under its Marcus consumer brand. That loss was partly offset by being able to reverse $440 million of previously-booked bad debt charges. Goldman’s fixed-income trading revenue fell 17% year-on-year, with “significantly lower” revenue in currencies and commodities. Equities trading fell 7%.
Bank of America separately reported a 29% increase in fixed-income trading for the quarter, driven by strong trading of mortgage and interest-rate related products.Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.
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