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Goldman Sachs’ giant bet on its own trading prowess just paid off

A lighted sign marks the Goldman Sachs trading post on the floor of the New York Stock Exchange, Tuesday, Aug. 5, 2014. The designated market maker operations of Goldman Sachs were sold to Dutch company IMC Financial Markets, which is scheduled to rebrand the post next week. (AP Photo/Richard Drew)
AP Photo/Richard Drew
Doubling down.
Published This article is more than 2 years old.

The numbers: Good. Goldman Sachs said today it earned $2.2 billion in the third quarter, up 48% from the same period a year earlier. Revenues rose 25% to $8.4 billion.

The takeaway: Goldman got its trading mojo back, thanks in part to a resurgence of volatility in bond and currency markets. Revenue from trading fixed-income, currency and commodities – a business that has been declining since 2009 at Goldman and other Wall Street firms – jumped 74% from a year ago, to $2.2 billion.

What’s interesting: While rivals such as Morgan Stanley have downplayed the role of trading in recent years, Goldman has continued to emphasize the importance of trading even as a combination of post-financial crisis regulation and a downturn in volatility weighed on results. During the third quarter, that seemed like the right strategy. Trading results rebounded in the third quarter at JPMorgan Chase, Bank of America and Citigroup. But the uptick at Goldman outpaced them all. So have government attempts to tame risk-taking in the financial sector had any effect at all? Yes, actually. Even at Goldman, fixed-income trading accounted for roughly 26% revenue in the latest quarter compared with about 48% of annual revenues in 2009.

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