Goldman Sachs Profit Declines on Drop in Fixed-Income Trading

Goldman Sachs Group Inc. ( GS) reported a 7.1% drop in profit as revenue from fixed-income trading declined for the fifth time in six quarters.

 

Net income fell to $2.17 billion, or $4.38 a share, from $2.33 billion, or $4.60, a year earlier, the New York-based company said Friday in a statement. The average estimate of 23 analysts in a Bloomberg survey was $4.36.

 

Chief Executive Officer Lloyd C. Blankfein, whose firm is the most reliant on trading among the biggest U.S. banks, has seen revenue from that business drop in each of the past five years. Top banks all saw declines last quarter as oil prices plunged to the lowest level since 2009, interest rates fell the most in two years and credit spreads widened.

“Trading has been pervasively weak,” Chris Kotowski, an analyst at Oppenheimer & Co., said on Bloomberg Television before results were announced. “There’s going to be ongoing pressure on all these businesses until it gets right-sized and makes a decent return.”

The three largest U.S. banks — JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. — posted their worst combined quarterly trading revenue since 2011, led by a 23% drop in fixed-income, currencies and commodities, or FICC.

Oil Prices

In the first half of the year, executives bemoaned markets that weren’t moving much, giving clients little reason to trade. That reversed in the fourth quarter, as oil prices plunged to the lowest since 2009, interest rates fell the most in two years and credit spreads widened.

Goldman Sachs fell 1% to $178.49 in New York trading yesterday, its fifth straight daily decline. The stock has dropped 7.9% this year, almost erasing 2014’s gain of 9.4%.