David Solomon, CEO Goldman Sachs, talking on CNBC’s Squawk Field on the World Financial Discussion board in Davos, Switzerland on Jan. twenty second, 2026.
Oscar Molina | CNBC
When Goldman Sachs executives had been requested about disappointing leads to the agency’s mounted earnings division this week, they made it sound as if the buying and selling setting was merely not of their favor.
Mounted earnings income fell 10% within the first quarter, coming in $910 million beneath analysts’ expectations, in keeping with StreetAccount information. It was an unusually giant miss for considered one of Goldman’s flagship Wall Avenue companies.
“It was mainly only a perform of the general setting making markets,” CFO Denis Coleman instructed an analyst on Monday after the financial institution’s incomes report. “We stay actively engaged with purchasers, however our efficiency in charges and mortgages was comparatively decrease.”
However as almost all of Goldman’s rivals, together with JPMorgan Chase, Morgan Stanley and Citigroup, posted blockbuster outcomes for first-quarter mounted earnings within the days that adopted, one factor turned clear to Wall Avenue: Goldman Sachs’ vaunted mounted earnings merchants had underperformed.
JPMorgan noticed mounted earnings buying and selling income soar 21% to $7.1 billion, the financial institution’s second-biggest haul ever. Morgan Stanley, the place mounted earnings is much less a precedence than equities, posted a 29% soar within the bond enterprise. Citigroup noticed bond buying and selling income soar 13% to $5.2 billion.
Since earlier than the 2008 monetary disaster, when Lloyd Blankfein led Goldman Sachs, the agency’s mounted earnings division had been the envy of Wall Avenue. Goldman was recognized for its buying and selling prowess, a repute solid in intervals of dislocation when its desks generated outsized positive aspects. The financial institution’s id as a dealer’s agency — one anticipated to outperform in turbulent instances — has endured within the decade-plus since.
That makes the first-quarter stumble notably notable.
“It appears that evidently one thing went fallacious at Goldman in mounted earnings,” mentioned veteran Wells Fargo analyst Mike Mayo, who referred to as the financial institution’s outcomes “worst-in-class.”
“I would think about that at Goldman, a fireplace is being lit underneath the merchants, managers and threat overseers in FICC after such an underperformance,” Mayo mentioned in an interview with CNBC, utilizing an acronym standing for mounted earnings, currencies and commodities, the formal identify for that enterprise.
The prevailing concept is that Goldman was caught offsides on trades tied to rates of interest within the first quarter, in keeping with a number of market contributors who requested for anonymity to talk candidly.
That is due to the positioning that many Wall Avenue corporations had initially of this yr, when markets had been anticipating the Federal Reserve to chop rates of interest at the least twice in 2026, these individuals mentioned.
However after the value of oil surged with the arrival of the Iran warfare, roiling expectations for inflation, the markets started pricing these cuts out, with some buyers even bracing for the potential of fee hikes this yr.
Mounted earnings was the only real blemish on 1 / 4 by which Goldman Sachs exceeded expectations handily, because of the agency’s equities merchants and funding bankers. Regardless of the earnings beat, the agency’s shares dropped as a lot as about 4% on Monday following the report.
Goldman Sachs declined to remark. However on Monday, CEO David Solomon sought to place the quarter’s efficiency into context:
“After I have a look at the dimensions and the range of the enterprise, it is performing very, very properly,” Solomon mentioned through the firm’s convention name. “Some quarters, it may be stronger right here, stronger there.”
