Goldman Sachs posted a 53 percent decline in fourth-quarter profit as revenue from fixed income tumbled, dashing hopes that Wall Street's largest investment bank might buck a volatile climate that has hurt rivals such as Citigroup Inc. Bond trading revenue - including commodities and currencies - fell 39 percent from the third quarter, reflecting what Goldman called "generally low client activity levels."
In morning trading, Goldman Sachs Group Inc shares were down 2.5 percent to $170.33. Shares of other banks also fell. During the quarter, a steep increase in US bond yields left many banks flat-footed. Citigroup posted a 58 percent drop in fixed income revenue on Tuesday, while J.P. Morgan Chase & Co reported an 8 percent decline last week.
Goldman rival Morgan Stanley is set to report quarterly results on Thursday. Bank of America Corp, which has the former Merrill Lynch business at the heart of its investment banking unit, is due on Friday. While revenue from Goldman's customer trading fell, the bank made more money from trading for its own account. Revenue from its investing and lending business rose 45 percent and accounted for more than 20 percent of the firm's overall revenue.
Quarterly profit roughly matched Wall Street expectations, while revenue fell short. Long known for generous payouts to employees, Goldman said compensation would be down in 2010 from 2009, but the decline is smaller than the drop in revenue. Quarterly net income after payment of preferred stock dividends totalled $2.23 billion, or $3.79 per share, compared with $4.79 billion, or $8.20, a year earlier. Net revenue fell 10 percent to $8.64 billion.
Goldman emerged from the financial crisis as it went in, as one of the most powerful but controversial US banks. Recent attention has focused on its dealings with Facebook Inc, including a decision this week to limit a private offering of stock in the Internet social network company to non-US investors. Nonetheless, Goldman shares have held up far better than those of many rivals. Its shares closed Tuesday above where they were when the financial crisis exploded in September 2008.
Compensation per employee for 2010 fell 14 percent from 2009 to about $431,000, and total pay and benefits fell 5 percent to $15.38 billion. Still, the ratio of compensation and benefits to net revenue rose to 39.3 percent from 35.8 percent. For all of 2010, Goldman's profit after preferred stock dividends fell 37 percent to $7.71 billion, or $13.18 per share. Net revenue fell 13 percent to $39.16 billion.
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