NEW YORK, Sept 16 (Reuters) – Goldman Sachs expects its fixed-income, currencies and commodities (FICC) business will be slightly softer in the third quarter compared to very strong performance for its equities business, Chief Executive David Solomon said on Wednesday.
“Our equity business continues to be very strong on a relative basis. FICC has been a little bit softer on a relative basis, but there’s still a few weeks left in September,” he told the Barclays’ global financial services conference.
Goldman’s FICC business has been volatile this year. Net revenue surged 32% in the second quarter from a year earlier, but fell 10% in the first quarter when its rates business was hit by volatility from the Iran war.
The Wall Street bank’s shares were down 4% in afternoon trade with broader weakness in banking shares.
Bank of America CEO Brian Moynihan had said on Monday that investment banking fees in the industry will fall about 10% in the third quarter, with his bank seeing more of a decline than the industry, which triggered selling across banking shares.
Global investment banking revenue dropped to $21.194 billion in the third quarter through September 15, versus $23.765 billion a year ago, Dealogic data shows, due to slowdowns in mergers and acquisitions and the raising of debt.
Solomon cautioned investors to expect a much more muted third quarter from the perspective of the firm’s investment line after significant activity in the second quarter.
Goldman Sachs exceeded second-quarter profit expectations as deal-making picked up and market volatility, fueled by the Iran war, boosted equities revenue to a record.
He said the firm’s transaction expenses are running higher, while it has accelerated some its technology investments.
As a result, the firm’s non-compensation expenses will be higher by $500 million while provisions for bad debt will creep up due to “a couple of idiosyncratic things”, Solomon said without elaborating.
(Reporting by Saeed Azhar and Arasu Kannagi Basil; Editing by Chris Reese and Jonathan Spicer )
