Goldman Says Currency Unit Didn’t Post Third-Quarter LossMichael J. Moore
Goldman Sachs Group Inc., the Wall Street firm with the biggest revenue decline last quarter, said its currency trading business didn’t incur a loss in the period as the bank sought to clarify a figure in a regulatory filing.
“Goldman Sachs did not suffer a loss in our currencies business in the third quarter,” Michael DuVally, a spokesman for the New York-based bank, said today in an e-mailed statement. “Gains or losses in one product type frequently offset gains or losses in other product types.”
Reuters reported earlier today that the bank posted more than $1 billion in market-making losses on currency products in the third quarter, citing U.S. Securities and Exchange Commission and Federal Reserve filings. Goldman Sachs said in its quarterly SEC filing on Nov. 7 that the figure isn’t representative of how it manages the business.
The filing discloses market-making revenue from different products. Each product’s revenue can include gains or losses that are booked in another business, such as a commodity deal that’s hedged with currency swaps. The figure also excludes trading commissions and net interest income.
Earlier this year, the SEC asked Goldman Sachs to disclose how much products such as mortgages and commodities contribute to its trading revenue to give investors more clarity on how the firm makes most of its money. The SEC completed its review after the firm responded that it would give more “qualitative disclosure” and already had provided the market-making figures by product.
Those figures often provide investors with information that conflicts with the performance of the bank’s units. The first quarter of this year included a $1.14 billion loss in interest-rate products, according to the filing, while the company said its rates business had a positive quarter reflecting “higher activity levels.”
In the third quarter of 2010, the disclosure showed currency products produced a loss of $4.59 billion, swinging from positive revenue of $3.6 billion the previous quarter. Then-Chief Financial Officer David Viniar said the firm’s currency business produced higher revenue in the third quarter than in the second.
The Wall Street Journal reported earlier today that revenue in Goldman Sachs’s currency-trading unit slumped during the third quarter after a wrong-way bet on a structured options trade tied to the U.S. dollar and Japanese yen. DuVally declined to comment on that report.