Goldman Sachs profit sinks 82% after it pays SEC fine, British tax
Hit by a big government fine and difficult trading conditions, leading Wall Street investment bank Goldman Sachs Group Inc. saw its second-quarter profit plummet 82% from the year-earlier quarter.
The bank said Tuesday that it earned $613 million, or 78 cents a share, compared with net income of $3.4 billion, or $4.93 a share, for last year’s second quarter. Its revenue fell more than a third to $8.8 billion from $13.8 billion.
Trading had been the engine of growth at all Wall Street banks over the last year. But over the last three months, stock and bond prices have been volatile. Goldman’s revenue from stock trading alone dropped 89% from last year’s second quarter, while revenue from bond and fixed-income trading fell 35%.
The bank’s chief financial officer, David Viniar, acknowledged that Goldman — the premier name on Wall Street — had fallen prey to the volatile markets and not done a good job of anticipating the continuing instability.
Viniar, though, said most of the decline in revenue came from a lack of client activity — as some analysts had feared — rather than from bad decisions made by Goldman’s traders.
Still, analysts tended to believe that Goldman’s earnings probably would bounce back.
“Overall, they’ve proven that they know how to profit in a tough market,” said Matthew Albrecht, a bank analyst with Standard & Poor’s. “I think we will continue to see that.”
Goldman released its results before the markets opened. Shares fell initially, then rose, gaining $3.23, or 2.2%, to close at $148.91.
Late last week, the company agreed to pay $550 million to settle a lawsuit filed by the Securities and Exchange Commission over allegations that Goldman misrepresented a deal it made during the financial crisis.
But Fabrice Tourre, a Goldman employee and codefendant in the SEC case, did not settle and filed a vigorous defense Monday, leading to the possibility that the company’s name will be dragged through a high-profile litigation.
Goldman’s bottom line also was hurt by a $600-million tax that Britain had imposed on bonuses for bank executives there.
