Goldman drops 3% on poor results

Goldman Sachs declined as much as 3% in New York trading after revenue dropped the most among the biggest Wall St banks and fixed-income results were the worst since the financial crisis.

Third-quarter revenue of $6.72bn (€4.9bn) was 20% lower than a year earlier and fell short of the $7.35bn average estimate of 17 analysts surveyed by Bloomberg.

Bond trading plunged 47% to $1.29bn, the New York-based company said in a statement yesterday.

Chief executive Lloyd Blankfein, 59, cut expenses 25% in the quarter to offset falling revenue, including a 35% reduction in compensation.

The firm was the only major bank to post a decline in equities trading, and revenue compared with the second quarter dropped in three of the company’s four business units.

Fixed-income revenue “looks very weak, and surprisingly, it looks clearly weaker than its peers,” said Richard Staite, a bank analyst at Atlantic Equities.

“It’s more than just weak client trading, it looks like. They could’ve been badly positioned in the market.”

Goldman Sachs declined 2.4% to $158.30 at 8.26am in New York. The stock had gained 27% this year through yesterday after advancing 41% in 2012. The shares, which are still below their pre-crisis peak of $247.92 on Oct 31, 2007, have traded below 1.5 times book value for the past three and a half years, the longest such streak in the company’s history.

Third-quarter net income rose to $1.52bn, or $2.88 a share, from $1.51bn, or $2.85, a year earlier, according to the statement. Goldman Sachs boosted its dividend 10% to 55c.

“The third quarter’s results reflected a period of slow client activity,” Mr Blankfein said in the statement.

“As longer-term US budget issues are resolved, we could see an improvement in corporate and investor sentiment that would help lay the basis for a more sustained recovery.”

Expenses fell to $4.56bn. Compensation, the firm’s biggest cost, dropped to $2.38bn and amounted to 35% of revenue for the quarter, down from 44% a year earlier. The ratio was 38% for all of 2012.

Fixed-income, currency and commodity trading revenue of $1.29bn fell short of analysts’ estimates of $1.85bn from Sanford C Bernstein & Co’s Brad Hintz and $2.04bn from Staite at Atlantic Equities.

It trailed JPMorgan Chase&’s $3.44bn in fixed-income revenue and Citigroup’s $2.78bn.

Goldman Sachs said its revenue from trading in interest rates and mortgages was “significantly lower” from a year earlier.