Top investment banks Goldman Sachs Group and Morgan Stanley Thursday said quarterly profits rose, as trading of bonds and other fixed income securities compensated for the lack of mergers and other deals.
Goldman Sachs, which had a record quarter for fixed income, currencies and commodities trading, said profits for the fourth quarter ended Nov. 28 surged to $971 million, or $1.89 per diluted share, from $505 million, or 98 cents per diluted share, a year ago.
Morgan Stanley reported profit for its fourth quarter ended Nov. 30 rose to $1.04 billion, or 94 cents per diluted share, from $732 million, or 67 cents per share, a year ago.
But shares of both Goldman and Morgan Stanley fell in premarket trading on Instinet. Shares of Goldman traded at $96.50, down from Wednesday's close of $98.35 on the New York Stock Exchange. And shares of Morgan Stanley fell to $55.98, down from a close of $57.63 on the NYSE on Wednesday.
Goldman said revenues from trading and principal investments rose 48 percent to $2.62 billion.
Revenue for the division that trades fixed income securities, currencies and commodities, the firm's dominant revenue source in recent years, rose 36 percent to $1.14 billion. Trading was driven by mortgages. commodities, and credit products, Goldman said.
Goldman's head of the fixed income and commodities, Lloyd Blankfein, was promoted to president and chief operating officer, filling a position being vacated by John Thain, who was named as the new chief executive of the New York Stock Exchange on Thursday.
Goldman's investment banking revenues were $647 million compared with $523 million in the fourth quarter of last year. The advisory business, which includes mergers and acquisitions, was $303 million, slightly up from the same period a year ago.
Fixed income also drives Morgan
Morgan Stanley also said revenues were driven by fixed income sales and trading.
Revenue rose 20 percent to $5.1 billion over the year-earlier quarter, but was down 3 percent from the third quarter of this year.
Sales and trading of fixed income securities rose, driven in part by tighter credit spreads and volatility in the commodities market. Revenues from fixed income sales and trading rose 66 percent to $977 million.
Equity sales and trading rose by 48 percent to $919 million from last year, helped by increased trading on stock markets.
Advisory revenues for investment banking declined by 17 percent to $225 million from last year, reflecting a still weak market for mergers and acquisitions. Underwriting revenues rose by 21 percent to $391 million from last year.