Goldman Sachs Group Inc. (GS) saw trade orders at its trading desks reach record levels, as volatility returned in global markets. Huge orders were placed by hedge funds, as bets on a number of investments, including the US treasury, went sour.
As US Treasury slumped Wednesday, a number of hedge funds, who previously had a positive outlook on the economy, were busy liquidating and hedging their positions. Long positions in oil, tax-driven mergers, Fannie Mae (FNMA) and Freddie Mac (FMCC) all went sour.
At one point, FICC revenues were the biggest growth driver for banks, but after the financial crisis of 2008 and subsequent implementation of stricter regulations, many banks have been forced to reconsider their strategies.
Increased volatility in the third quarter has helped Goldman Sachs earn staggering revenues from the troubled FICC industry. Goldman Sachs saw revenues from its trading business increase 74% year-over-year to $2.2 billion. The company also saw profits from its trading business increase, supported by better revenues and lower bonus distribution.
Harvey M. Schwartz, Goldman Sachs’ Chief Financial Officer, said on Wednesday, “It’s clearly an environment that reminds all of us about the power of investor sentiment. Investors were quite frankly shooting first and asking questions later. Yesterday was a difficult day for many of them. Our focus is being there for them. We have the intellectual capital and the financial capital to help address their needs. And we remain committed to doing it.”
Goldman Sachs, the last independent Wall Street Bank, reported its third-quarter results on Thursday. The company recorded earnings of $4.57 per share and net income of $2.1 billion, beating analysts’ expectations of $3.21 and $1.5 billion, respectively. The bank’s revenue increased 25% year-over-year to $8.4 billion, surpassing analysts’ expectation.
Goldman Sachs saw revenues from its Institutional Client Services business increase 32% over last year to $3.77 billion. FICC client execution revenues increased 74% from the year-ago period to $2.17 billion.
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