GOLDMAN SACHS and Morgan Stanley each suffered at least 10 days of trading losses in the second quarter, underlining how turbulent markets have cast a pall on Wall Street since April.
The banks’ trading results deteriorated sharply from the first three months of the year before uncertainty about the US economy, European sovereign debt and the fate of new financial industry regulation sapped investors’ confidence.
Goldman’s traders had lost money on 10 separate days during the second quarter, the bank disclosed yesterday in a filing with the US Securities and Exchange Commission (SEC).
On three occasions they posted shortfalls of at least $100 million (€75.6 million). Goldman earned at least $100 million on 17 days.
The bank’s traders, along with their counterparts at JPMorgan Chase, made money on every single business day during the first quarter, a first for each.
Goldman’s trading desk recorded a profit of at least $25 million on each of that quarter’s 63 working days, making more than $100 million a day 35 times.
The first quarter is traditionally Wall Street’s strongest, providing up to one-third of the sector’s annual profits.
Goldman said last month that revenue from trading and principal investing had tumbled during the second quarter, led by a 89 per cent decline in equity trading.
In yesterday’s filing, Goldman also confirmed that both the UK Financial Services Authority and Finra, the US securities industry’s self-regulating body, were investigating whether the bank had properly disclosed that it had been the target of a SEC inquiry into its mortgage-backed securities business. Finra has declined to comment.
Last month Goldman settled the SEC’s charges that it had misled investors in a collateralised-debt obligation, agreeing to pay a $550 million penalty.
Goldman reported revenue of $6.55 billion from its trading and principal investing businesses during the second quarter, compared with $10.8 billion in the same quarter one year earlier.
Morgan Stanley’s traders lost money on 11 days during the second quarter. The bank reported losses of between $50 million and $75 million twice, but never lost more than $75 million on any one day. Its traders posted gains of at least $100 million on six days.
In the first period Morgan Stanley’s trading desks recorded daily losses on four times.
The bank’s sales and trading operations had revenue of $3.66 billion during the second quarter, including debt-valuation adjustments, or gains taken to account for widening spreads on Morgan Stanley’s own bonds. – (Copyright The Financial Times Limited 2010)
