By Liz Hoffman Updated Feb. 5, 2019 4:12 p.m. ET Goldman Sachs Group Inc. is planning to cut back its commodities-trading arm, once a huge moneymaker and training ground for a generation of executives including former chief Lloyd Blankfein. The retreat follows a monthslong review under new Chief Executive David Solomon that showed the commodities business’s dwindling profits don’t justify its costs, according to people familiar with the matter. Executives are discussing pulling back from trading iron ore, platinum and other metals, and are ordering cost cuts to the sprawling logistics network that handles the transport and storage of physical commodities. By taking a knife to the business, Mr. Solomon is sending a message down the ranks that nothing is sacred. Executives have been conducting in-depth reviews of each business, looking for more profitable ways to spend shareholders’ money. They are expected to present their plans to the bank’s board of directors later this month and brief investors this spring. Chief Financial Officer Stephen Scherr last month said there was an “active and engaged move to reallocate capital” away from Goldman’s troubled fixed-income-trading arm and toward priorities including lending and technology upgrades. A Goldman spokesman said the firm hadn’t reached any final conclusions related to its business reviews. The pullback in commodities is as symbolic as it is strategic. Goldman has been a major player in commodities since its 1981 takeover of J. Aron & Co., a coffee and metals trader. Wildly profitable in the 1990s and early 2000s, J. Aron produced a bloodline of executives who would later run the firm, including Mr. Blankfein and Gary Cohn. That dynasty ended last year with the rise of Mr. Solomon and his lieutenants, investment bankers who are less emotionally wedded to the trading business. “Lloyd Blankfein was never going to abandon” the commodities business, said Charles Peabody, a stock analyst at Portales Partners. Investors don’t value volatile trading operations as highly as they once did, preferring more predictable revenues from lending and asset management. Goldman is pushing into consumer lending and corporate cash management and said in January that more than 60% of its revenue now comes from more-recurring sources, up from 48% five years ago. Commodities trading, meanwhile, is in decline. In 2017, Goldman’s traders had their worst year on record. They fared somewhat better in 2018, but executives believe the business is unlikely to repeat its heyday of the 2000s, when it contributed as much as 15% of Goldman’s pretax profits. Since then, tighter regulations have driven most banks from the business. Morgan Stanley sold a fleet of oil tankers and scaled back its energy trading. JPMorgan Chase & Co. quit most physical trading altogether. Banks’ commodities-trading revenues fell from $8.3 billion in 2011 to $2.5 billion in 2017, according to data firm Coalition, as the business migrated to less-regulated firms such as Glencore PLC. Goldman, through its J. Aron subsidiary, largely stayed put, a move that many onlookers attributed to Mr. Blankfein’s fondness for the business and belief in its eventual rebound. Goldman is one of the country’s biggest natural-gas marketers and a major player in power and oil. It is building a green-energy solutions business for corporate clients while dipping its toe into the nascent market for liquefied natural gas. But traders have been handcuffed. Risk-taking by one measure—the amount of money its commodities traders stood to lose on a given day—is down by 60% thirds since 2010. A hiring spree in 2017 meant to bring in star traders failed to spark a turnaround, and the firm’s co-head of commodities, Jeremy Taylor, recently left.
I know this thread is 6 months old. But, I recall that one time I was looking at the annual report (2016, 2017 ?) for GS and it listed the number of successful Trading Days that they had, and it was 250/250. They made money everyday the market was open. Just for curiosity, I tried to find the same entry for 2018, but I can't find it anywhere. I emailed GS to ask them, but I did not receive a reply. Is that entry still found in their annual reports? https://www.goldmansachs.com/invest...rts/2018-annual-report/annual-report-2018.pdf
Provided I read it well, the chart bottom-right p.91 of the PDF document you mention suggests their trading lost money 31 days in 2018.