Goldman Sachs is known for outperforming its competitors on Wall Street.
But in the third quarter, it was Goldman that underperformed.
The Wall Street firm said on Thursday that both its revenue and its profit declined more sharply than expected as the bank struggled with volatility in the financial markets.
It was a tough quarter for most big banks, which were hobbled by the market turmoil set off in August by China’s economic slowdown. But Goldman’s third-quarter results were even worse than its competitors’.
At the huge trading desks of Goldman’s biggest competitor, JPMorgan Chase, revenue fell 11 percent from the same quarter a year earlier. At Goldman, the decline was 34 percent.
Goldman was hit particularly hard by the large investments it held in its own portfolio — a part of the bank that had generally done well in recent years.
Revenue from its so-called investing and lending division dropped 60 percent from the same quarter a year ago and 63 percent from the previous quarter. Goldman said that was caused by a decline in the price of the public stocks it held.
Guide to Wall Street Earnings
Wall Street banks have warned that their third-quarter results will be hobbled by difficult trading conditions.
Goldman’s chief financial officer, Harvey M. Schwartz, acknowledged the difficulties, but he defended the company’s long-term strategy, which has been to stick with difficult businesses as other competitors scale back.
“We are keenly aware of the challenges facing the industry,” Mr. Schwartz said in a call with analysts Thursday morning. “We believe that our long-term prospects are quite favorable.”
The bank’s analysts, though, expressed concern that its strategy was not playing out as expected. Glenn Schorr, an analyst with Evercore ISI, noted during the call that the dynamics in the industry would seem to be working in Goldman’s favor.
“It feels like actually the world that you talked about was coming your way, but yet, the revenue reduction for Goldman is more pronounced,” Mr. Schorr said. “I’m just trying to do the smell test and wonder, why is that? I would think there would be more opportunities, not less.”
Mr. Schwartz cautioned Mr. Schorr and other analysts against focusing too much on the results of a single quarter and comparing Goldman with competitors.
“We don’t see as much value in comparing revenues,” Mr. Schwartz said. “If you really look to the quarter-to-quarter noise, you run the risk of over-steering the business.”
Goldman has been cutting costs to adjust to the difficult environment in which it is operating. The amount set aside for compensation and bonuses in the latest quarter was down 16 percent from a year ago and 38 percent from the previous quarter.
Those numbers, and similar ones from other banks, suggest that end-of-year bonuses across Wall Street will probably be disappointing this year and build on the declines that have already been seen in recent years.
That could be particularly true because the cuts to bonuses so far have not kept up with the decline in revenue, at least at Goldman. Total revenue at the bank fell 18 percent from a year earlier, to $6.9 billion, compared with the $7.1 billion expected by analysts.
Profit fell 38 percent, to $1.3 billion, or $2.90 a share, in the third quarter from the quarter a year ago. Analysts polled by Thomson Reuters expected $2.91 a share.
Shares of Goldman ended Thursday up just over 3 percent.
Some analysts seemed willing to accept Mr. Schwartz’s argument that the lagging quarterly results should not be viewed as a long-term danger for the firm, particularly given its continuing cost-cutting.
Christian Bolu, an analyst with Credit Suisse, wrote in a note to clients that the pessimism surrounding Wall Street banks would, for Goldman, provide a “favorable setup” for the beginning of next year, when results typically strengthen.
During the last quarter, Goldman announced that its chief executive, Lloyd C. Blankfein, had a “highly curable” form of lymphoma. Mr. Blankfein’s condition was not discussed during the call on Thursday.
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