Goldman’s Traders Turn In Worst First Half of Blankfein’s Reign

  • Second-quarter fixed-income trading revenue tumbles 40%
  • Every other business line surpasses analysts’ estimates

Goldman Sachs 2Q FICC Trading Misses Estimates

Lloyd Blankfein’s roots are letting him down.

Goldman Sachs Group Inc. traders turned in their worst first-half performance since Lloyd Blankfein rose from that business to become chief executive officer in 2006.

Revenue from trading stocks and bonds in the first six months of 2017 tumbled 10 percent, dropping to the lowest level since before Blankfein took over from Hank Paulson 11 years ago. Second-quarter revenue from the fixed-income unit plunged 40 percent.

“A mixed operating environment persisted into the second quarter as conditions continued to support underwriting and M&A, while constraining certain market-making activity,” Blankfein said Tuesday in a statement.

Apart from the trading slip, every other major business beat analyst estimates compiled by Bloomberg. Investment-banking revenue fell 3 percent to $1.73 billion from a year earlier, better than the $1.59 billion prediction. Investment management as well as the Investing and Lending business also surpassed expectations.

Goldman Sachs has been facing questions about the durability of its business model after failing to match rivals in beating revenue expectations for the first quarter. The bank has stayed committed to trading even as many global markets experience less of the volatility and price swings that made the business so lucrative in the past.

Read more: Goldman’s fix for trading woes

Total trading revenue, which also includes equities, fell 17 percent for the three-month period, to $3.05 billion. That missed analysts’ $3.13 billion estimate. In fixed-income trading, the bank cited “significantly lower” revenue from trading in interest rates, commodities, credit products and currencies. Stock trading rose 8 percent to $1.89 billion, surpassing analysts’ $1.71 billion prediction.

The fixed-income tumble in the second quarter compares with a 19 percent drop at JPMorgan Chase & Co. and a 6 percent decline at Citigroup Inc.

Goldman Sachs fell 0.6 percent to $227.94 at 9:36 a.m. in New York trading. The shares declined 4.3 percent this year through Monday, worse than the 6.7 percent advance in the Standard & Poor’s 500 Financials Index.

Blankfein has sought avenues for growth, including a new online lender and additional resources for asset management, yet the firm is still reliant on trading and investment banking. The two businesses accounted for 67 percent of 2016 revenue.

Net income was virtually unchanged at $1.83 billion, or $3.95 a share, compared with $1.82 billion, or $3.72, a year earlier, the company said in the statement. The average estimate of 23 analysts surveyed by Bloomberg was for adjusted earnings of $3.43 a share.

Companywide revenue fell 1 percent to $7.89 billion, compared with the $7.52 billion estimate. Expenses fell 2 percent to $5.38 billion.

Revenue from the Investing and Lending segment, which houses equity stakes owned in other firms and loans made to corporations or high-net-worth individuals, rose 42 percent to $1.58 billion. Investment-management revenue climbed 13 percent to $1.53 billion on record management and other fees. Assets under supervision climbed to $1.41 trillion.

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