Oct. 17 - Goldman Sachs cut costs to try to prop up profits, but the sharp falloff in fixed income trading – its big money maker – is a worry to investors. Fred Katayama reports.
All that talk over the Fed's tapering in the summer led Goldman Sachs' fixed income trading revenue to plunge more than 40 percent. That's the investment bank's big money maker, so its quarterly net revenue fell 20 percent, deeply disappointing Wall Street. Goldman CEO Lloyd Blankfein blamed the results on what he called "slow client activity." Profits fell only slightly, beating expectations. That's because Goldman slashed costs and paid a lower tax rate. Like J.P. Morgan, it set aside less money for pay, its biggest expense. UBS analyst Brennan Hawken called the compensation cutback a "mixed bag," saying, it's "positive as it shows the flexibility of the business model, negative as it is a clear indication of how weak the revenue environment is." Goldman hiked its quarterly dividend by a nickel a share. But the positive profit and payout news wasn't enough to overcome investors concerns over revenue. Goldman's stock, which is up 27 percent this year in line with other bank stocks, fell at the market open. Goldman is the latest bank to report dismal results. J.P. Morgan surprised Wall Street with its loss, ending its six quarter win streak. And like Goldman, Citigroup got slammed by the falloff in bond trading.