Are Rivals Snatching Fixed-Income Business From Goldman Sachs?

Fixed-income trading remained the key driver of big banks' profits and hiring last quarter. Goldman Sachs earnings due early Tuesday will fill in a key data point: Are other bulge-bracket institutions regaining market share they'd lost to Goldman in the past two years?

Unlike JPMorgan and Bank of America, Goldman is expected to report first-quarter revenue from fixed-income trading declined from the same period of 2009. For example, Barclays Capital analyst Roger Freeman pegged Goldman's fixed-income revenue $6.09 billion compared with $6.56 billion a year earlier, according to a March 30 research note cited by BusinessWeek.

While a major profit center for most global institutions, the segment is even more critical for Goldman. Fixed-income, currency and commodities generated slightly more than half the bank's $45.2 billion total net revenue last year.

Rivals including Bank of America, Citigroup and Morgan Stanley, which retrenched in 2008 amid the financial crisis, raced to rebuild trading desks last year. Morgan Stanley, for instance, added more more than 350 slots for sales and trading professionals during 2009. (It's slated to report first-quarter earnings this Wednesday.)

Still, strong volumes elsewhere don't automatically come at Goldman's expense. Banks are seeing "a lot of client flow," JPMorgan Chief Executive James Dimon said last week. Credit Suisse analyst Howard Chen explained to BusinessWeek:

Competition appears to be returning, but it's not necessarily a zero-sum game as the overall market is growing. Global GDP is positive, fixed-income issuance levels have been robust and client liquidity levels seem healthy.