Goldman Sachs sheds Midas sheen

The misstep by the financial leader speaks to what could be a more lasting shift on Wall Street. Banks, required by regulators to discontinue high-profit businesses such as proprietary trading, reduce borrowings and hold more capital, may no longer be able to produce the supercharged earnings common before the financial crisis.

Trading operations are muted. Risk-taking is tempered. And boring businesses are back in vogue.

"These firms are going back to the traditional investment banking model of the 1980s and early 1990s," said Tom Marsico of the mutual fund firm Marsico Capital Management, once a large owner of financial stocks.

While Goldman posted decent results in equity trading and investment management, it lost nearly $US3 billion on its investments in stocks and bonds, more than offsetting the pockets of strength.

Investors have been anticipating the weakness for months. Since the beginning of the year, shares of financial companies have plummeted. While shares of Goldman jumped 5.5 per cent on Tuesday, reflecting investor expectations and favourable developments in Europe, they were still down almost 40 per cent for the year.

Goldman reported a loss of $US428 million for the third quarter, compared with a $US1.74 billion profit a year ago. It got hit by its stakes in stocks and bonds, losing $US1.05 billion on its stake in Industrial and Commercial Bank of China, a strategic investment the company made in 2006.