Something Stinks About Goldman's Trading Business


The hot question of the day: Was Goldman’s disastrous quarter — which was caused by horrible trading revenue — the result of general market conditions, or is there something wrong at Goldman specifically?

On the company’s conference call, CFO David Viniar denied that the Goldman franchise is sullied.

Others are not so sure.

This is interesting from JPMorgan:

Weak trading revenues in FICC were a key driver of Goldman’s 2Q underperformance. This segment was down 63% from the prior quarter, well more than peers; management commentary suggests that weakness across the business, as well as a significant reduction in risk-taking, led to the disappointing result. The magnitude of the decline was surprising given Goldman’s history of outperforming peers. A quarter does not make a trend so focus will be on third quarter results and Goldman’s ability to bounce back. We had downgraded Goldman in January to Neutral as spreads looked fair.

OK, this needs to be revisted next quarter.

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