From the Financial Times (ft.com)……with a few points of emphasis by me…….
Goldman Sachs made at least $100m in net trading revenues on 131 days last year – equivalent to once every other trading day, according to a filing with the Securities and Exchange Commission on Monday.
Goldman managed the result even as it took greater trading risks in 2009 than in the previous year. Its daily “value at risk” (VAR) – the most that the bank estimates that its traders could lose on a given day – was $218m in 2009, up from $180m during the previous fiscal year, which closed in November 2008.
Goldman earned a record $13.4bn in 2009 as net revenues more than doubled to $45.2bn and the bank reined in compensation costs amid a furore about bonuses earlier in the year.
Goldman’s 131 $100m-plus trading days in 2009 shattered its previous high of 90 days, set in 2008. In last year’s 263 trading days, the bank lost money 19 times, Goldman said in the filing. Its daily losses never exceeded $100m. “It’s impressive, but it’s not unexpected,” David Hendler, an analyst with CreditSights. “They were one of the few games in town in 2009.”
Goldman’s performance came during a year when the demise of several rivals left it and fellow survivors better able to capitalise on the flurry of debt and equity trading that followed the financial crisis.
The controversy over banks’ profits and compensation policies, and an uncertain outlook for both the markets and financial services regulation, could make it difficult for it to approach 2009’s performance any time soon, Mr Hendler said. And competitors had regained their footing. “It may have been a high-water mark.”
Trading and principal investments, which includes Goldman’s merchant banking activities, account for more than 75 per cent of its total net revenue.
The rise in Goldman’s daily VAR was “principally due to an increase in the interest rates category” as spreads widened, and a “reduction in the diversification benefit across risk categories”, the bank said. The bank’s VAR tied to commodities trading declined as energy prices fell.
The bank reports daily VAR at a 95 per cent confidence level, representing the one-day trading loss that it would expect to exceed only 5 per cent of the time.
