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Goldman Sachs CEO Flags Softer Q3 for Fixed-Income Trading Division
Goldman Sachs' (GS) fixed-income, currencies, and commodities (FICC) trading business is tracking a "slightly softer" third quarter, Chief Executive David Solomon announced Wednesday. The guidance contrasts with the bank's equities business, which he described as remaining "very strong on a relative basis."
Trading and Investment Outlook
Speaking at the Barclays global financial services conference, Solomon provided an early look into the Wall Street giant's performance with a few weeks left in the quarter. "FICC has been a little bit softer on a relative basis, but there’s still a few weeks left in September," he stated.
The FICC division's results have been volatile this year. According to previous reports, its net revenue surged 32% year-over-year in the second quarter but fell 10% in the first quarter. Solomon also cautioned investors to expect a "much more muted" third quarter from the firm’s investment line following significant activity in Q2.
Broader Industry Headwinds
Solomon's comments align with a broader slowdown in investment banking activity across the industry. Earlier in the week, Bank of America CEO Brian Moynihan projected that industry-wide investment banking fees would fall by about 10% in the third quarter.
AdData from Dealogic corroborates this trend, showing global investment banking revenue totaled $21.194 billion for the third quarter through September 15. This figure is down from $23.765 billion during the same period a year ago, reflecting a slowdown in mergers and acquisitions and debt issuance.
Rising Expenses and Market Reaction
Goldman Sachs is also facing rising costs. Solomon noted that non-compensation expenses are expected to be higher by $500 million due to increased transaction expenses and accelerated technology investments. He added that provisions for bad debt will also "creep up" because of "a couple of idiosyncratic things," without providing further detail.
Following the CEO's remarks, Goldman Sachs shares were down 4% in afternoon trading on Wednesday, contributing to a wider sell-off across banking stocks.
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