By Saeed Azhar
NEW YORK, April 15 (Reuters) – Goldman Sachs’ rates business suffered losses on some positions towards the end of the last quarter as fixed-income market volatility due to the Iran war forced it to hold on to certain positions as a market maker, two people familiar with the matter said.
The Wall Street firm’s fixed income, currencies and commodities (FICC) division posted a 10% drop in revenue to $4.01 billion in the first quarter, hit by a slowdown in interest rate trading, mortgages and credit products, when the bank reported earnings on Monday.
In contrast, bigger rival JPMorgan Chase said revenue from fixed-income markets climbed 21% to $7.1 billion, while Citigroup and Morgan Stanley also saw strong gains. Bank of America saw modest gains in its fixed-income trading business.
The people spoke on condition of anonymity because the reason for Goldman’s weaker FICC performance was not public, though it was reported earlier by the Financial Times.
The investment bank acts as a leading global market maker, providing liquidity and quoting buy and sell prices across equities, FICC and derivatives.
Goldman Sachs’ President John Waldron told a Semafor conference in Washington on Wednesday that he had no concern about the firm’s FICC business despite the results.
“You can get in traffic where things don’t go your way at any given moment in time,” he said. “You know you have to end the quarter at a certain date and you show what happened.”
“If you look at it in the fullness of time, I have no concerns about our FICC business. Our FICC business is very strong,” Waldron said.
Currency and bond markets turned markedly more volatile in the first quarter as the conflict with Iran led to an energy shock and forced investors to rethink a once-dominant view that major central banks would deliver interest-rate cuts this year.
The jump in oil prices and wider uncertainty over inflation and growth triggered a rapid repricing across rates and foreign exchange markets, with analysts and investors increasingly warning that policymakers could stay on hold for longer, or even lean hawkish, if the energy shock proves persistent.
“Goldman is quite heavy in macro in rates and there were some big changes in the month of March and they’re not always going to be on the right side of every trade,” said Mike Mayo, a banking analyst at Wells Fargo.
“One quarter like this from Goldman can be partly excused away. If they have another quarter like this, people will start to connect the dots.”
(Reporting by Saeed Azhar; Additional reporting by Saqib Ahmed; Editing by Megan Davies and Jamie Freed)
