Goldman Sachs Group Inc reported a 7 percent drop in fourth-quarter profit as an unexpected bout of market volatility in December hit its bond-trading business. Fixed-income trading, long a strength for the bank, came under pressure last year due to stricter capital rules in the aftermath of the financial crisis and relatively calm markets that discouraged clients from trading.
Just when it seemed things were picking up, a burst of volatility last month caused by factors ranging from plunging oil prices to weak global economic data, spooked investors again. Goldman said revenue from trading fixed-income securities, currencies and commodities (FICC) fell 19 percent in the quarter, excluding gains from repayment of debt and the sale of most of its European insurance business in 2013.
Overall, FICC revenue fell 29 percent to $1.22 billion in the quarter, mainly due to low levels of activity in debt products and mortgages, partially offset by significantly higher net revenue from trading commodities and currencies. The business, which once contributed about 40 percent of Goldman's revenue, has been on a decline since 2009 as new rules also discourage banks from trading on their own account and it accounted for only about 16 percent of revenue in the quarter.
J.P. Morgan Chase & Co's FICC revenue fell 14 percent in the quarter, Citigroup Inc's 16 percent and Bank of America Corp's 30 percent. Goldman's shares were down 1.6 percent before the bell as investors also reacted to a 16 percent fall in investment banking revenue to $1.44 billion. The bank said net revenue dropped for both equity and debt underwriting.
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