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Portfolio > Economy & Markets > Fixed Income

Goldman’s Q3 Sales Fall 20%, Profits Flat

By Janet Levaux

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Goldman Sachs (GS) said Thursday that its third-quarter net income was $1.52 billion, or $2.88 a share, vs. $1.51 billion, or $2.85, a year ago. These results beat estimates, but net revenue fell far short of expectations.

Sales dropped 20% year over year to $6.72 billion. Goldman’s investment bank, for instance, reported a 44% drop in revenue from bond, currency and commodities trading.

The bank, led by Lloyd Blankfein, cut costs by 25% to $4.56 billion in the third quarter, and compensation expenses declined by 35%.

“Ongoing uncertainty around the economic outlook and the traditional seasonal slowdown drove a significant reduction in client activity during the quarter,” said CFO Harvey M. Schwartz, in a call with analysts early Thursday.

“This reduction in nationwide client activity obviously impacted the opportunity set in many of our businesses,” Schwartz said. In investment banking, equity and equity-related volumes declined 27% quarter over quarter. Debt [unintelligible] volumes declined 10% versus the prior quarter, and completed M&A volumes declined 36% sequentially.”

In its institutional business, net revenues from fixed client execution were $1.2 billion in the third quarter, he says, “substantially lower than the second quarter.”

Investment management fees topped $1 billion but were 1% lower than they were in the prior quarter. Assets under supervision grew by $36 billion to $991 billion. “Net market appreciation of $19 billion was primarily in equity assets, while $17 billion in inflows were concentrated in fixed income assets,” Schwartz said.

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