Goldman's Solomon Blames Market, Not Bad Bets, for Trading Missby
Firm’s co-president says risk-management isn’t a problem
FICC revenue fell short of estimate by about $340 million
Goldman Sachs Group Inc.’s disappointing fixed-income trading results in the first quarter were caused by clients’ lack of conviction, not bad wagers by the firm, co-President David M. Solomon said.
“This was not a quarter defined by positions losing money,” Solomon, 55, said Monday in a Bloomberg Television interview on the sidelines of the Milken Institute Global Conference in Beverly Hills, California. “This was a quarter defined by lower client activity and the firm not maximizing the revenue opportunity.”
Goldman Sachs’s earnings report sent the stock tumbling on April 18 and left much of Wall Street trying to figure out what went wrong. Traders got burned by a constellation of souring debts tied to, among others, a position in a coal-mining giant that lost money, people with knowledge of the results said in the days that followed. The firm’s fixed-income desks handling bonds, currencies and commodities generated $1.69 billion in revenue, about $340 million less than estimates and barely higher than a year earlier.
“There is absolutely no risk-management problem, that was not what defined the quarter,” Solomon said. “This was a quarter that was defined by low volatility, a lack of conviction with our clients. One of the things I would say is our business is definitely weighted, or levered, to times when our clients have a lot of conviction. One of the things that happened is that conviction sort of ebbed.”
The initial market response to President Donald Trump’s November victory sent U.S. stocks soaring on the promise of lower taxes, less regulation and higher growth. Investors cooled to the promise in the first quarter amid government inaction and failed legislative efforts.