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In the midst of a sea-change, nausea is to be expected – even for those of a sturdy constitution. Goldman Sachs, which has weathered the credit squall in better shape than peers, is looking a little green round the gills. The bank yesterday reported its first quarterly loss as a public company. In the circumstances, profit of $2.32bn for the year underlines Goldman’s relative strength in a sickly sector.

The impression, nevertheless, is that the bank is battling to keep control in stormy seas. Even Goldman’s vaunted risk management struggled as hedges in its trading business were found wanting in the fourth quarter. Meanwhile, volatility pushed the amount of risk taken in Goldman’s trading business to new highs, as losses on leveraged loans and principal investments turned net revenues into the red.

There may yet be more to come. Almost $1bn in losses on Goldman’s principal real estate investments – a 25 per cent drop in value – may be overtaken given the lack of deals through which to value its holdings.

But the prominence of these highly-leveraged businesses must now fade as Goldman struggles to reinvent itself. Disconcertingly, the bank must hold tight and wait to see how demand recovers for its other services as an adviser, lender and intermediary. It has picked up business from rivals, for example, in prime brokerage but that cannot compensate, say, for a prolonged deal-making slump. Growth in prime broking balances has, in any case, started to reverse as the hedge fund industry shrinks.

In spite of its seeming disdain for retail banking, Goldman’s makeover after converting to a bank holding company has begun. It aims to build deposits. Leverage has plummeted, to 13.7 times from 23.7 times at the end of the third quarter on a gross basis. Queasy investors, then, must become accustomed to more modest returns. But, in classic Goldman spirit, the bank is also poised to take advantage of depressed asset valuations. Traders eyeing opportunities, however, still appear leashed. The storm has eased but not yet passed.

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