Fourth-quarter profits at Goldman Sachs Group Inc. fell 53 percent as trading revenue tumbled, dashing hopes that the Wall Street bank had bucked a tough market climate that hurt its rivals.

Bond trading revenue, including commodities and currencies, slid 39 percent from the third quarter as worries about European sovereign debt and rising U.S. Treasury yields kept investors on the sidelines.

“Things were just dead” in December, though “it’s sure a lot more active” in January, Chief Financial Officer David Viniar said on a conference call. “What we need really is conviction on the part of our customers and clients.”

The lackluster results capped a year that has tested Goldman’s reputation as “smartest on the Street.” The bank has been criticized for activities such as its management of an offering by social networking company Facebook Inc. and its marketing of a mortgage-related security that led to a $550 million regulatory settlement last July.

Profit fell for a third straight quarter, and revenue fell short of estimates; for the year, profit declined 37 percent and revenue fell 13 percent.

Goldman nonetheless said it would pay out nearly 40 percent of revenue to employees in the form of compensation and benefits for 2010, a higher percentage than in 2009. percent, to $170.38.

Shares of other banks, including Morgan Stanley and Bank of America Corp, which report results later this week, also fell, and the Standard & Poor’s Financials Index declined 1.4 percent.

Citigroup Inc. and JPMorgan Chase & Co. previously reported declines of 58 percent and 8 percent, respectively, in quarterly fixed-income revenue.

“If Goldman Sachs can’t show a strong performance, then good luck to anyone else trying,” said Simon Maughan, an analyst at MF Global in London.

Blankfein said in a statement the bank is “seeing signs of growth and more economic activity” following difficult conditions for much of 2010.