- Goldman Sachs Group, Inc. Chairman and Chief Executive Officer Lloyd Blankfein participates in a panel discussion during the White House Summit on Working Families in Washington June 23, 2014.
- Jonathan Ernst/Reuters
Goldman Sachs has a problem.
The US bank beat earnings estimates on Tuesday, with a strong performance in equities trading, debt underwriting and asset management helping power the beat.
But the troublesome fixed income, currency and commodities client execution unit had a weak quarter, with revenues of $1.16 billion 40% lower than the second quarter of 2016, and down 31% from a weak first quarter. The bank put that down to “significantly lower net revenues in interest rate products, commodities, credit products and currencies, partially offset by higher net revenues in mortgages.”
At $1.16 billion, FICC revenues were significantly lower than equities trading revenues, which came in at $1.9 billion. It’s also the worst quarterly performance for FICC since the fourth quarter of 2015. Here’s a breakdown of Goldman’s FICC revenues in recent quarters:
- Q2 2017 – $1.16 billion Q1 2017 – $1.685 billion Q4 2016 – $2 billion Q3 2016 – $1.96 billion Q2 2016 – $1.93 billion Q1 2016 – $1.66 billion Q4 2015 – $1.12 billion
To be sure, the weakness in FICC was not unexpected. But the scale of the decline at Goldman Sachs is likely to worry Wall Street analysts and investors. Here’s a comparison with what other Wall Street banks have reported so far:
- Goldman Sachs FICC revenue – $1.16 billion – down 40% year-on-year JPMorgan FICC revenue – $3.2 billion – down 19% year-on-year Citigroup FICC revenue – $3.4 billion – down 6% year-on-year Bank of America Merrill Lynch FICC revenue – $2.1 billion – down 14%
The weak second quarter performance also follows a tough first quarter, when revenue ticked up just 1% on the first quarter of 2016, and dropped from the final three months of 2016. Goldman Sachs delivered $2.8 billion in FICC revenues in the first half, down 19% from the same period last year.
“A mixed operating environment persisted into the second quarter as conditions continued to support underwriting and M&A, while constraining certain market-making activity,” Lloyd Blankfein, chairman and chief executive, said in a statement.
Expect Wall Street to want answers about that “mixed environment.”
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