Goldman Sachs Group Inc reaped more than $100 million in trading revenue on a record 34 separate days during the first three months of 2009, almost double the number in all of 2005.
For December, there were 10 trading paydays bigger than $100 million, the New York-based firm said on Wednesday in a filing with the US Securities and Exchange Commission.
Goldman Sachs, which took $10 billion from the US Treasury’s bank-rescue program in October, reported a record $6.56 billion in revenue from trading fixed-income, currencies and commodities in the first quarter. David Viniar, the company’s chief financial officer, said on April 14 that the trading success was due to “favourable competitive dynamics,” wider margins and higher volatility.
“It was a good trading quarter,” said Brad Hintz, an analyst at Sanford C Bernstein & Co who rates Goldman Sachs “market perform.” “Their revenue return on trading assets was very, very high because bid-offer spreads were very high.”
Goldman Sachs lost money on eight trading days in the first quarter and six in December, the filing showed. The December period included a single day in which the firm lost $859 million, reflecting an $850 million writedown of bridge and bank loans related to LyondellBasell Industries AF SCA, which filed for bankruptcy protection on April 24.
The number of days on which Goldman Sachs’s traders made more than $100 million in the first quarter exceeded the previous high of 28 days in the first quarter of 2008, company filings show.
Previous Years
The firm had 90 such days in fiscal 2008, compared with 88 in 2007. In 2006, the firm’s traders made more than $100 million on 49 days during the year, up from 18 days in 2005 and 14 days in fiscal 2004.
Goldman Sachs’s trading results reflected the firm’s willingness to take on more risk during the period. Value-at- risk, an estimate of how much the firm could lose in any given day, surged to an average of $240 million in the first quarter from $157 million in the first quarter of 2008. Most of the increase came from bets on interest rates, the company said.
“The increase in interest rates was primarily due to higher levels of exposure and volatility, and wider credit spreads,” Goldman Sachs said in the filing.
Trading and principal investments accounted for 61 percent of the bank’s revenue in the first quarter of 2009, up from 59 per cent in the first quarter of 2008. Net interest income, the difference between the interest the firm pays and what it charges, doubled from the first quarter of 2008 as the company’s interest expense dropped 76 per cent, the filing showed.
FDIC Bonds
Banks such as Goldman Sachs are benefiting from lower borrowing costs after the Federal Deposit Insurance Corp. in October started guaranteeing bank debt issues that mature within three years. Goldman Sachs has issued about $22 billion of debt that’s guaranteed by the FDIC, according to data compiled by Bloomberg.
Wednesday’s filing showed the weighted average interest rate paid by Goldman Sachs on its unsecured short-term borrowings dropped to 2.14 percent in March from 3.37 percent in November.
