Goldman Sachs Finishes Tough Year With New Low in Debt Trading

  • Fixed-income tumbles 50% to lowest since the financial crisis
  • Investment-banking surge of 44% offers one bright spot
Bloomberg Intelligence’s Alison Williams examines fourth-quarter results for Goldman Sachs.

A rough 2017 got even worse for Goldman Sachs Group Inc. in the final three months.

Fourth-quarter revenue from fixed-income trading tumbled 50 percent, with revenue falling to the lowest level since the financial crisis. The last three months also brought Goldman Sachs’s first quarterly loss in more than six years -- driven by a charge tied to the U.S. tax overhaul. The trading slide, which has persisted all year, has prompted major questions about the firm’s strategy.

Chief Executive Officer Lloyd Blankfein is hoping 2018 will bring a rebound in what was once his bank’s largest business and higher profits from the U.S. tax cut. Goldman Sachs gave itself a head start by moving up some pay expenses into its annus horribilis to take advantage of bigger tax breaks.

The top U.S. banks are laying out what the Republican-led tax overhaul means for their future profits and giving hints as to how they’ll spend their windfalls. Goldman Sachs didn’t specify how tax reform will affect its 2018 rate.

For the last quarter of 2017, however, the tax changes meant a one-time charge of $4.4 billion. That was smaller than the $5 billion hit Goldman warned might be coming last month.

Goldman's Slide

Annual bond-trading revenue tumbles to lowest in more than a decade

Source: Company filings

Outside of trading, the news was much brighter. Revenue in the bank’s three other segments rose in both the quarter and for the full year, led by a 61 percent annual jump in the investing and lending unit.

Here’s a quick summary of key numbers from the results:

  • The company posted a quarterly net loss of $1.93 billion, or $5.51 a share, compared with profit of $2.35 billion, or $5.08, a year earlier, the New York-based company said Wednesday in a statement. Excluding the tax charge, earnings were $5.68 a share, beating the $4.90 a share average estimate of 19 analysts surveyed by Bloomberg.
  • Companywide revenue fell 4 percent to $7.83 billion, compared with the $7.63 billion estimate compiled from 16 analysts. Annual revenue rose 5 percent to $32.1 billion.
  • Revenue from fixed-income, currencies and commodities trading declined to $1 billion for the biggest drop among the four largest trading firms that have reported results so far. That missed analysts’ $1.28 billion estimate.
  • Investment-banking revenue climbed 44 percent to $2.14 billion, as equity underwriting fees more than doubled.
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