A 50% increase in its quarterly profit was reported by the Goldman Sachs Group Inc. or GS.N as its bond market activity last month helped significantly in boosting its trading revenue. It was an indication that banks that stick with such extremely unstable business can eventually reap big rewards.
The company’s Fixed-Income, Currency, and Commodities or FICC trade that has contributed to 40% of its revenue in the past, has been declining since 2009 when new regulations discouraged banks from trading using their own account.
Trading operations of different banks had scaled up or leave the business due to doubts about the industry to ever truly rebound.
That has left Goldman and other banks such as the JPMorgan Chase & Co to obtain clients, while taking advantage of market volatility periods like what occurred in September.
The bond trading revenue of Goldman soared to 74% to 2.17 billion dollars during the third quarter, which was due to U.S. strong economic data, European Central Bank stimulus measures, as well as the sudden exit of Bill Gross (a trading superstar) from Pimco (a giant bond-trading company).
Oppenheimer & Co analyst Chris Kotowski said the long drought onto the trading floors could be an indication of an end.
Among the biggest business of Goldman, the FICC contributed to nearly 26% of its total revenue during the quarter, while its growth had surpassed the gains of several banks, including Morgan Stanley, JPMorgan, Bank of America Corp, and Citigroup Inc., according to reports on Friday.
Shares of Goldman went down at $173.63, while stocks have been descending on the most-recent days due to worries on global economy’ health. Bank shares have also been hit very hard.
The company earnings surpassed the market estimates, although some analysts doubted the quality of the beat, pointing out that earnings were attributed to the company’s investing and lending industry as Goldman bets its own money. The company’s performance this quarter is believed to be unlikely sustainable due to tougher regulations.
