Goldman Sachs has a long list of 'investment priorities' for its struggling bond trading business

Goldman Sachs has been having a tough time in bond trading, a business that was once a dependable source of revenue.

The US bank delivered $2.8 billion in fixed income, currencies and commodities client execution revenues in the first half of 2017, down 19% from the same period last year. That figure was $4.7 billion in 2015 and more than $5.6 billion in both 2013 and 2012.

In fact, Goldman Sachs' latest first-half performance in FICC client execution was its worst since the US bank started reporting the results in the current format.

Rather than using the cliff to push for a restructuring of the business, Goldman is heading in a different direction.

Credit Suisse analyst Susan Roth Katzke, recently met with Goldman Sachs' global cohead of the securities division Pablo Salame and reports the following (emphasis ours):

"While some might advocate for a restructuring of the Goldman FICC franchise, the focus on cost and capital rationalization was never lost on management-this has been done, and perhaps more aggressively and extensively than what might have been optimal, in retrospect---note the >30% decline in related RWAs and what we believe to have been a near equal decline in direct operating expenses ... Today, management has "no angst" with respect to profit margins in the FICC business … there are investments to be made and gaps to be filled with a willingness and ability to do so.

Here's a list of Goldman Sachs' priorities in FICC, according to Katzke (again, the emphasis is ours):

• "A focus on broadening the client base (asset managers and corporates in focus, with more opportunity to gain wallet share than had been previously anticipated)."
• "A broadening of the product set to build out the cash trading franchise (cash credit is a recurring example of an investment now well underway)."
• "There's a continued focus on building out the financing businesses (lending and DCM both supportive of the FICC franchise)"
• There's "some incremental investment in favor of the EM franchise (though management is clear it will never have a money center bank-like footprint)."
• "Longer term, cash management/treasury services is an initiative squarely on Goldman's radar screen, with the view that technology renders these businesses more disrupt-able today and limited/no presence is not ok."

Get the latest Goldman Sachs stock price here.