Strength in its equities desk and M&A advisory cushions losses for Goldman Sachs

Heightened market volatility and widening credit spreads in fourth quarter reduces bond revenue for JPMorgan Chase and Citigroup

Goldman said overall trading revenue rose 2%  in the three months ended December. Equities trading revenue jumped 17%  to $1.60bn, while bond trading revenue slid 18% to $822m. Photograph:  Reuters/Brendan McDermid

Goldman said overall trading revenue rose 2% in the three months ended December. Equities trading revenue jumped 17% to $1.60bn, while bond trading revenue slid 18% to $822m. Photograph: Reuters/Brendan McDermid

 

Goldman Sachs topped analysts’ revenue estimates on Wednesday as strength in its equities desk and M&A advisory cushioned losses from bond trading, making it the only Wall Street bank so far to show growth in fourth-quarter trading revenue.

Heightened market volatility and widening credit spreads in the fourth quarter reduced bond revenue for JPMorgan Chase and Citigroup. Yet equity traders remained busy as investors changed positions in a choppy market.

Goldman, which is more sensitive to market fluctuations than its peers, said overall trading revenue rose 2 per cent in the three months ended December. Equities trading revenue jumped 17 per cent to $1.60 billion, while bond trading revenue slid 18 per cent to $822 million, far from its peak of more than $6 billion.

Citi’s bond trading revenue fell 21 per cent, JPMorgan saw a 16 per cent fall, while Bank of America, which reported earlier in the day, posted a 15 per cent drop.

Investment banking, a business Goldman is trying to bolster to lower its dependence on market-sensitive trading, fell 5 per cent to $2.04 billion. Revenue in its financial advisory business surged 56 per cent, boosted by higher fees from dealmaking. Revenue from equity and debt underwriting fell.

Goldman’s net earnings attributable to common shareholders was $2.32 billion, or $6.04 per share, in the quarter, compared with a loss of $2.14 billion, or $5.51 per share, a year earlier.

The company did not provide an update on any expenses related to a scandal in its press statement, but said in its presentation that chief executive officer David Solomon is expected to provide commentary on the matter during a conference call with analysts later on Wednesday.

Investors

At Bank of America its consumer banking arm saved the day for investors, sending shares surging as they helped make up for a bond-trading slump. Gains in the retail-banking business drove a record profit for the company in the fourth quarter.

Net interest margin, the difference between what a bank charges borrowers and pays depositors, climbed to 2.48 per cent in the quarter, more than what analysts predicted. Higher rates and improving loan growth have spurred larger profits at Bank of America’s consumer business in each of the past seven quarters, allowing the bank to weather a loss of market share in its investment-banking unit as it pulled back on risk.

Average deposits in that division grew 3 per cent, while its net interest income rose 12 per cent. Fees from investment banking slipped 5 per cent at $1.3 billion, beating a median estimate of $1.2 billion.

– Reuters