Goldman Sachs investment portfolio lost nearly $900 million because of the coronavirus.
However, this became a problem due to the market decline in the first quarter thanks to coronavirus pandemic.
Company lost almost US$900 million, which led to a 46% decline in profits. Strong trading operations performance helped to mitigate the damage, as market volatility led to increased demand for them.
Goldman's extensive investment activities have helped the company to show high profits in some quarters, but have also made it vulnerable to market fluctuations. Currently, management plans to focus more on attracting client funds rather than investing with its funds. Goldman said the firm has experienced "significant net losses" on its debt securities and equities.
Goldman Sachs shares fell 2.6 percent to US$173.53 at 8.17 a.m. at a pre-market in New York City. The value of the shares fell 22 percent, compared to a 27 percent decline for S&P 500 Financials.
The firm's revenues fell by US$890 million after growing by nearly US$2.3 billion in the fourth quarter. In its February Form 10-K report, the firm said that with a 10% decline in value of shares and debt securities in its portfolio, net revenues would drop by US$4.2 billion.
Firm did not disclose which assets the sale helped it to recover losses. In February, Goldman announced the largest private real estate transaction in British history. Blackstone Group Inc. acquired IQ Student Accommodation from Goldman, which owns several dozens of student hostels. After the deal was completed, it was expected to bring a great deal of profit.
Revenues from trading operations
Rapid market fluctuations this quarter led to a large increase in revenues from trading operations, which showed an increase of 28%, which can be considered the best result for the last five years. Shares, which rose to record highs in January, have suffered the sharpest fall since the 1987 collapse.
However, it is not clear whether the growth in trading will remain sustainable. In addition, a long period of economic turmoil may disrupt a company's strategy of increasing profitability by reducing costs and increasing the capital value.
Goldman's investment bankers performed well in the quarter, earning US$2.2bn and surpassing analysts' forecasts.
Ups and downs at Goldman Sachs reflected the results of JPMorgan Chase&Co, which on Tuesday said that trading revenue increased along with losses on loans. Bank of America Corp management said on Wednesday that it allocated US$4.76 billion to cover loan losses which became the largest figure since 2010.
Goldman has been increasing the amount of funds allocated to consumer banking services in the last few years. The company's losses from loans more than quadrupled from US$224m to US$937m. The firm blamed "pressure in the energy sector", the impact of COVID-19 and new accounting standards.