Goldman’s disclosed average value at risk for currencies in the quarter that ended on September 30 was $17 million, which was slightly higher than the $12 million VAR for the same quarter in 2012, but lower than the $23 million for the second quarter this year. That prediction for a Goldman total of over $1 billion now seems to be wide of the mark, which highlights the continuing difficulty that analysts and investors have in understanding how much risk is being taken in fixed-income sales and trading by banks, even after standalone proprietary dealing desks have been shut. A breakdown of estimated product-line income published by JPMorgan bank stock analyst Kian Abouhossein on October 2 (before Goldman released its third-quarter results) had predicted that full-year 2013 FX revenue at Goldman would be $1.1 billion, compared with a $2.6 billion estimate for Deutsche Bank. Goldman had a 2.75% share of the FX marketin Euromoney’s most recent poll of over 16,000 currency end users published in May, a level that was less than a fifth of top-ranked Deutsche Bank’s 15.18% customer share.īut Goldman’s FX revenue for 2013 was expected to be close to 50% of Deutsche Bank’s income, at least until its recent trading mishap. Goldman has been able to take a bigger share of the FX revenue pool than its customer volume ranking would suggest, which implies that its appetite for risk-taking is higher than that of its competitors and might also explain why it saw an income slump in a quarter when currency volatility was subdued. Goldman fell out of the top-10 FX dealers in this year’s Euromoney poll of customer volume and was replaced by Bank of America Merrill Lynch at number 10, in the only change in ranking for a top dealer. Goldman Sachs is not a big player in the market for foreign exchange dealing with clients, which is dominated by four universal banks: Deutsche Bank and Citi, followed by Barclays and UBS.
The apparent scale of the slump in currencies perplexed rivals and stock analysts alike, however.
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