Goldman Sachs slumps $730m into the red

The pre-tax losses were even worse than analysts had expected, but Goldman’s shares rose in early US trading after the bank said it was taking steps to cut costs – including employee pay – for the benefit of shareholders.

After tax and other adjustments, the company highlighted a lower loss of $428m. This compared to profits of $2.8 billion during the same period last year.

The banking behemoth saw net revenue drop 60 per cent from the third quarter of 2010, to $3.6bn. It was its sixth consecutive year-on-year revenue decline, as Wall Street struggles with new regulations and choppy markets.

Although revenue dropped in some of Goldman’s core banking and trading businesses, the main source of losses was its investing and lending division, which uses the firm’s own capital to make long-term investments. The division reported negative revenue of $2.48bn for the third quarter as asset values dropped sharply.

Goldman’s investment in the Industrial and Commercial Bank of China alone generated more than $1bn of paper losses.

Chief executive Lloyd Blankfein blamed the poor results on difficult market conditions and a lack of confidence among investors and corporate clients. “Our results were significantly impacted by the environment,” he said.

Goldman has cut 1,300 jobs since June, and its latest performance means pay and bonuses for its 34,200 employees will almost certainly fall from its £270,000 average this year.

l State Street, the US asset servicing firm with a major European base in Edinburgh, saw its third-quarter profits rise slightly to $540m.

The firm, which is the world’s third-largest institutional investor and has about 840 staff in the Scottish capital, said it got a lift from tax benefits and double-digit gains from servicing and investment management fees.