Goldman Sachs' Trading Picture Turns Uneven Ahead of Q3 Close

Goldman Sachs is facing an uneven trading picture as the third quarter comes to a close. In a recent update, CEO David Solomon noted that equities are still 'very strong,' but fixed income, currencies, and commodities (FICC) is looking 'a little bit softer.'

This split in Goldman's trading story matters because markets revenue plays a significant role for the bank. The fixed-income side can fluctuate significantly from quarter to quarter.

In fact, Reuters reported that FICC net revenue rose 32% in the second quarter compared to the same period last year, after falling 10% in the first quarter due to war-driven interest-rate volatility. However, Solomon is now flagging a 'much more muted' third quarter, even with a few weeks left in September.

This comes as dealmaking cools down, and Bank of America has predicted that industry investment-banking fees could fall by around 10% in the third quarter. Dealogic data cited by Reuters also shows global fees are lower year-on-year through September 15th.

Goldman's costs are also ticking up, with Solomon stating that non-compensation expenses will rise by about $500 million and provisions for bad debt will edge higher due to a couple of one-off issues. This could lead to 'negative operating leverage,' where profits fall faster than revenue, making Goldman's earnings more sensitive.