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By Greg Farrell and Francesco Guerrera in New York
Published: August 5 2009 20:30 | Last updated: August 5 2009 20:30
Goldman Sachs traders made more than $100m in revenues on each of a record 46 days during the second quarter, while losing money on just two days, the bank said on Wednesday, in a filing that underscored the strength of its trading operations.
Goldman also said lawmakers, regulators and shareholders had asked about its bonus awards, a subject that has generated fevered interest this year as the bank has reported strong profits. It “received inquiries from various governmental agencies and self-regulatory organisations regarding the firm’s compensation processes” and was co-operating with the requests.
Goldman last month reported $2.7bn in second-quarter profits, reflecting record revenues of $6.8bn from trading fixed-income securities, commodities, currencies and interest rates. Those so-called FICC revenues were up from the previous high of $6.6bn in the first quarter.
People close to the bank attributed the record quarterly result, filed with the Securities and Exchange Commission, to a boom in fixed-income and equity trading.
Goldman, which has a reputation for exacting risk management, also disclosed it had only two losing trading days – one in which it lost $75m-$100m and another in which it was $25m-$50m in the red.
Sceptics had predicted that after the first-quarter results the unusual conditions that powered FICC revenues would not last. But Goldman’s second-quarter earnings showed it continued to earn unusually high trading commissions, partly owing to reduced competition and pricing power derived from scarce liquidity.
Brad Hintz, analyst at Sanford Bernstein, has forecast the fav ourable trading conditions will continue. “We believe this cycle still has quite a way to run,” he said in a recent report. “The markets are becoming more liquid and trading volumes are increasing, and we argue this is positive news for the large bond houses on Wall Street.”
Goldman’s recent success has fuelled concerns over its comp ensation practices among politicians and the public at large. As in past practice, Goldman has set aside almost 50 per cent of net revenues, or $11.4bn, over the first six months of this year, for compensation and benefits. If its strong performance continues, it could pay bonuses comparable to those handed out in 2006 and 2007, the golden years of Wall Street compensation.
Copyright The Financial Times Limited 2009
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