Goldman Sachs Shares Decline Amid Poor Bond Trading Performance Amid Record Equities Earnings

Goldman Sachs Posts Record Equities Traders, But Faces Surprise Drop in Bond- and Rates-Trading Revenue

Goldman Sachs Group Inc. reported a record quarter from its equities team, with a banner performance that beat its previous all-time quarterly high by more than $1 billion. However, the bank's fixed-income, currency and commodities business posted revenue of $4.01 billion, down 10% from a year earlier and more than $800 million below the consensus of analyst estimates.

The bank's Chief Executive Officer, David Solomon, attributed the disappointing performance to high expectations set by analysts. He noted that Goldman's results were the 10th-best FICC quarter ever, but added that the research community had set the bar too high. The bank's equities traders rode the wave to a record quarter, driven by a surge in equities financing, which includes lending to large hedge fund clients and other speculative investors.

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In a statement, Goldman's chief financial officer, Denis Coleman, said that the fixed-income unit's performance in rates and mortgages was relatively lower than last year, while it improved in currencies and commodities. The bank also warned that its backlog of fees decreased slightly compared to the previous quarter.

Shares of Goldman Sachs slumped 2.4% to $886.24 at 2:10 p.m. in New York, by far the biggest decline in the 24-company KBW Bank Index. Despite the disappointing performance, the bank's equities boom was driven by a surge in merger activity, with investment bankers' advisory fees 89% higher than the same period last year.

The bank's asset-management division reported a rise in assets under supervision to $3.7 trillion, with net revenue increasing compared to the same period last year. The company also promoted seven more partners to its top management committee and hiked pay for its most senior executives, while announcing the departure of its top lawyer.