How pedestrian. Goldman Sachs Group (GS) posted a single-digit-percentage return on equity during a pretty woeful second quarter, a performance more like that of a garden-variety bank than a Wall Street powerhouse.

The result contrasted with the 20%-plus returns Goldman shareholders have become accustomed to and the 30%-plus returns often seen during the credit boom. In fact, putting aside the last two quarters of 2008, when the financialcrisis was reaching a crescendo, Goldman since going public in 1999 hadn't before Tuesday had a quarter in which its return on common equity was below 10%, according to Capital IQ.

The immediate cause of Goldman's weakness was a slump in trading activity that sent revenue in the bank's fixed-income, currencies and commodities division down 35%, to $4.39 billion. There also was an uncharacteristic blunder: Equities-trading revenue tumbled because Goldman was caught flat-footed when volatility rose as markets tumbled.

The worry for investors is that a more-fundamental change is afoot. More-stringent regulation, looming requirements for higher capital and a charged political environment already may be forcing Goldman to reduce its appetite for risk in ways that go beyond a single quarter. If so, Goldman's future returns could settle at about 15%, rather than the 20% the firm targets.

Goldman, like other banks, is having to hold more capital and run with lower leverage. At the end of the second quarter, Goldman's total assets of $883 billion were slightly less than 12 times total shareholders' equity. That compares with leverage ratios of about 25 times and more during the boom.

Goldman's second-quarter leverage ratio was in line with that of J.P. Morgan Chase (JPM), which reported an overall return on equity of 12%. Goldman, by comparison, reported a 7.9% return as net profit dropped to $613 million, compared with $3.4 billion a year earlier. Excluding a $550 million charge for the firm's recently announced settlement of a Securities and Exchange Commission lawsuit, as well as $600 million for a one-time U.K. bonus tax, the return would have been 9.5%.

What is telling is that Goldman didn't try to boost its return by ramping up leverage during the quarter. That is what happened at J.P. Morgan. That bank's investment-bank and asset-management units, which offer a better comparison to Goldman than the overall bank, saw leverage increase to 16.6 times from 15.8 times in the first quarter.

Returns on equity for those units fell to a combined 15% in the second quarter from 24.6%. But that was a lesser decline than the drop to 7.9% or 9.5% from Goldman's first-quarter return of 20.1%.

Granted, Goldman faced unique legal and political headaches in the second quarter that may have distracted key individuals and caused it to pull its horns in on risk. But the results still are out of character for the firm, and a timelyreminder for investors that Goldman, too, is mortal.

David Reilly

• performance [pə´fɔ:məns] n.履行；行为；工作 (初中英语单词)
• financial [fi´nænʃəl] a.金融的，财政的 (初中英语单词)
• weakness [´wi:knis] n.虚弱；弱点，缺点 (初中英语单词)
• appetite [´æpitait] n.欲望；食欲 (初中英语单词)
• slightly [´slaitli] ad.轻微地；细长的 (初中英语单词)
• comparison [kəm´pærisən] n.比较；对照；比喻 (初中英语单词)
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• crisis [´kraisis] n.转折点；危机 (高中英语单词)
• revenue [´revinju:] n.税收；收入 (高中英语单词)
• billion [´biljən] num.万亿 (高中英语单词)
• blunder [´blʌndə] n.&v.(犯)大错；疏忽 (高中英语单词)
• regulation [,regju´leiʃən] n.规则；章程；法规 (高中英语单词)
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• equity [´ekwiti] n.公平；公正 (英语六级单词)
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• reminder [ri´maində] n.提醒物；纪念品；暗示 (英语六级单词)