NEW YORK — Goldman Sachs Group Inc. swung to a $393 million third-quarter loss, mired in markdowns from equity investments and declines in underwriting and fixed income trading.

The results reveal how closely tied Goldman is to the fate of the global capital markets. The firm recorded its third straight quarterly revenue decline as client activity waned.

Net revenues of $3.59 billion fell 60% from the third quarter last year and 69% from $11.9 billion in the first quarter this year, a period when it looked like capital markets were awakening.

Europe's ongoing debt crisis and market volatility forced clients to the sidelines, and with them Goldman. "The firm's opportunity set begins with a client's decision to transact," said David Viniar, the firm's chief financial officer, on a conference call Tuesday.

Regulatory issues have dampened the near term outlook for Goldman's business and the firm remains cautious, he said, though "we remain optimistic about the medium and long term outlook."

The timing of an improvement in the environment is uncertain, he added. "Ultimately, our ability to adjust and effectively respond to our clients' needs will drive long-term return."

Perhaps more than other large banks, Goldman's fortunes wax and wane with trends in the capital markets. Concerns about its exposure to European debt helped stoke uncertainty in the quarter. Goldman's net exposure to European debt was $2.5 billion, Viniar said Tuesday.

Like other Wall Street firms, Goldman has turned to cost cutting, targeting $1.2 billion in expense reductions. Staff levels fell 4% from the second quarter as headcount dropped 1,300, though some of that was attributed to the sale of Litton Loan Servicing.

Goldman pledged earlier this year to cut 1,000 jobs, and Viniar suggested Tuesday that they are about half-way to meeting that goal.

Analysts polled by Thomson Reuters expected a loss of 16 cents a share on $4.3 billion in revenue, compared to the reported 84 cents a share loss. The only other time Goldman reported a loss as a public company was the fourth quarter of 2008, at the depth of the financial crisis.

About $2.5 billion of markdowns in the value of a sizeable portfolio of private equity and other investments pushed Goldman to the loss, in particular a $1 billion writedown in the value of its stake in Industrial & Commercial Bank of China Ltd. (601398.SH, 1398.HK). Without the markdowns, profits would have been 76 cents a share.

Fixed income, currency and commodities trading revenues fell 36% from the third quarter last year, to $1.7 billion, and were weaker than the second quarter--also a period of weakness--when excluding $300 million of gains from adjusting the value of Goldman's own debt. Without that so-called debt valuation adjustment, Goldman's FICC revenues were down 7% from the second quarter.

Underwriting revenues fell 61% from last year, to $258 million. Advisory revenue rose 5%, to $523 million. Equities trading, a bright spot, was up 18%, to $2.3 billion.

Goldman lowered trading risk earlier this year amid market and political uncertainty in Europe. Value at risk, or VaR, in its trading activities remained flat compared to the second quarter, at $102 million, though it rose toward the end of the month because of increasing volatility.

"I would expect assuming we made no changes to positions at all that our VaR would be fairly significantly higher in the fourth quarter than the third quarter," Viniar said.

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