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Goldman Reduces Headcount at Commodities Trading Division

Zacks Equity Research

The Goldman Sachs Group GS is trimming the commodities business by laying off 10 employees after giving fair warning to investors that commodities rally is likely to fade soon. The division once was a major source of revenues for the investment bank.

Per a Bloomberg’s article, Goldman is making cuts in metals and bulk commodities while the base and precious metals teams will be merged.

The decision comes after months of review conducted on Goldman’s businesses, as supported by the new chief executive officer David Solomon, with a view to control costs and tap on areas that could generate higher profits.

A similar review on the commodities arm revealed that the wing was not generating enough returns to justify the amount of capital being invested.

For Goldman's commodities traders, 2017 was a disappointing year. In 2018, the scenario improved slightly. However, it is yet to regain the spark it had in 2000, when it contributed about 15% of Goldman's pretax profits.

Per Coalition, a financial analytics firm, 12 major banks are expected to have generated commodities trading revenues of less than $4 billion in 2018, compared with nearly $16 billion in 2008.

While the bank is on track to remodel its business into a more profitable organization, it continues to be face investigations over its role in helping to raise funds for the 1Malaysia Development Bhd.

Moreover, the company recently stated that expenses made for the ongoing legal matters might be $1.9 billion above the aggregate reserves the company has kept for such purpose.

Shares of this Zacks Rank #3 (Hold) stock has lost 17% in the past six months.

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Camden National Corporation CAC has witnessed 1.4% upward estimate revision for current year over the past 60 days. It currently carries a Zacks Rank of 2.

Western Alliance Bancorporation WAL has witnessed 2.4% upward estimate revision for current year over the past 60 days. It currently carries a Zacks Rank of 2.

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