Goldman trims risk-taking to lowest level in seven years

Wednesday, 6 March 2013 00:00 - - {{hitsCtrl.values.hits}}

Reuters: Goldman Sachs Group Inc reduced its risk-taking for a third straight year, with potential losses from trading positions dropping to the lowest level in seven years. The Wall Street bank’s average daily value at risk last year was $ 86 million, down 24% from the preceding year, according to a filing with the US Securities and Exchange Commission.

The measure shows how much money Goldman estimates it could lose on an average day, with 95% confidence.

Goldman’s risk-taking in 2012 was at the lowest level since 2005, when it reported an average daily value-at-risk of $ 70 million. It was less than half the $ 218 million of average daily value-at-risk Goldman reported at its 2009 peak.

Declines in risk-taking were broad across Goldman’s positions in interest rates, equities, currencies and commodities. Goldman attributed the changes to lower volatility and reduced market exposure. Less risk-taking meant Goldman had fewer days with big losses or gains.

Goldman lost money on 16 trading days in 2012, compared with 54 days in 2011. It did not lose more than $ 75 million on a single day, whereas the previous year, it lost at least $ 100 million on four days. Likewise, the bank earned at least $ 100 million on 41 days in 2012, compared with 54 days in 2011.

Overall, Goldman’s trading and investing businesses were more profitable last year.

Goldman reported $ 5.6 billion in pretax earnings from its client trading business and $ 3.2 billion in pretax earnings from its investing and lending division, which puts Goldman’s own money to work. In 2011, those businesses reported earnings of $ 4.4 billion and a loss of $ 531 million, respectively.