Goldman Sachs Lost Money on 10 Days in Second Quarter

Goldman Sachs Group Inc., the bank that makes the most revenue trading stocks and bonds, lost money in that business on 10 days in the second quarter, ending a three-month streak of loss-free days at the start of the year.

Losses on Goldman Sachs’s trading desks exceeded $100 million on three days during the period that ended June 30, according to a filing today by the New York-based company with the Securities and Exchange Commission. The firm also disclosed that trading losses surpassed its value-at-risk estimate, a measure of potential losses, on two days.

Trading results across Wall Street firms declined after Goldman Sachs and its biggest competitors posted perfect results, with no losing days, in the first quarter. Goldman Sachs’s $5.61 billion in second-quarter trading revenue exceeded all its Wall Street competitors. The bank, overseen by Chairman and Chief Executive Officer Lloyd Blankfein, relied on trading for 71 percent of its revenue in the first half of the year, down from 80 percent a year earlier.

Today’s filing also shows that the firm’s traders generated more than $100 million on 17 days during the quarter. Of the 65 days in the quarter, Goldman Sachs traders made money on 55 days, or 85 percent of the time.

Photographer: Chris Kleponis/Bloomberg

Lloyd C. Blankfein testifies in Washington. Close

Lloyd C. Blankfein testifies in Washington.

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Photographer: Chris Kleponis/Bloomberg

Lloyd C. Blankfein testifies in Washington.

Equities, Commodities

Goldman Sachs booked losses of $2.81 billion in the second quarter, or $4.73 billion in the first half, on products related to interest rates, the filing said. In 2009, interest rates generated $4.22 billion in gains in the second quarter and $4.88 billion in gains for the first half, the filing shows.

The filing also shows that gains from equities and commodities slid in the second quarter and first half compared with the same periods a year earlier, while gains from credit products more than doubled to $6.48 billion in the first half from $3.11 billion a year earlier. Currencies produced a $6.79 billion gain in the first half, compared with a loss of $421 million in the same period last year, the filing shows.

Goldman Sachs’s daily average value-at-risk in the second quarter was $136 million, down from $161 million in the first quarter and $245 million in the second quarter of 2009.

While the firm doesn’t break out results from derivatives as opposed to cash trading, Goldman Sachs said late last week that it estimated derivatives account for about 25 percent to 35 percent of the firm’s revenue. The firm was responding to a request from the Financial Crisis Inquiry Commission.

Morgan Stanley

Morgan Stanley said separately today that it lost money on 11 days during the second quarter. The losses never exceeded $75 million daily, and never surpassed the firm’s value-at-risk estimate. Morgan Stanley’s traders made more than $175 million on one day, the firm said in an SEC filing today.

JPMorgan Chase & Co. traders also broke their three-month winning streak, losing money on eight days in the second quarter, according to an Aug. 6 securities filing. JPMorgan’s average daily trading revenue fell to about $72.4 million during the second quarter from $118 million during the prior three months. The firm made more than $200 million on ten days in the first six months of the year, JPMorgan said.

Goldman Sachs agreed last month to pay $550 million to settle a fraud lawsuit filed by the SEC over Goldman Sachs’s 2007 sale of a mortgage-linked investment. In the settlement, a record for the SEC and a Wall Street firm, Goldman Sachs said it made a “mistake” by failing to disclose that a hedge fund that helped construct the investment was also planning to bet against it.

In today’s filing, Goldman Sachs said investigations by the U.K.’s Financial Services Authority and by the U.S. Financial Industry Regulatory Authority of the firm’s Abacus 2007-AC1 collateralized debt obligation are continuing. Among the issues under investigation is the timing of Goldman Sachs’s disclosure to Finra and the FSA of the SEC investigation.

To contact the reporter on this story: Christine Harper in New York at charper@bloomberg.net

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