Goldman Sachs Revenue Tops Estimates, Profit Falls on Legal Cost
Goldman Sachs Group Inc.’s fourth-quarter revenue beat analysts’ estimates as fees from advising on mergers jumped 27 percent. Net income dropped 65 percent on costs to settle a mortgage probe.
Revenue fell 5 percent to $7.27 billion, more than the $7.17 billion estimate of 16 analysts surveyed by Bloomberg. Net income declined to $765 million, or $1.27 a share, from $2.17 billion, or $4.38, after an agreement to settle a U.S. probe into the bank’s handling of mortgage-backed securities reduced earnings by $1.54 billion, the New York-based company said Wednesday in a statement.
Goldman Sachs’s merger business benefited from a record $3.8 trillion of deals globally in 2015, surpassing the previous record set in 2007, before the financial crisis, according to data compiled by Bloomberg. The firm said last week it reached a $5.1 billion agreement in principle on the mortgage case, cutting fourth-quarter profit and closing out a year of record legal and litigation costs.
“Our diversified business mix allowed us to deliver solid results in a year characterized by uneven global economic activity,” Chief Executive Officer Lloyd Blankfein said in the statement. “Our strong global client franchise leaves us well positioned to generate superior returns over the long term.”
Goldman Sachs shares fell 1.4 percent to $154.68 at 8:16 a.m. in New York. The stock had dropped 13 percent this year through Tuesday, trailing the 10 percent decline of the 88-company Standard & Poor’s 500 Financials Index.
Investment-banking revenue rose 7 percent to $1.55 billion, with advisory revenue climbing to $879 million from $692 million a year earlier. For all of 2015, merger-advisory fees rose 40 percent to $3.47 billion, the highest since 2007.
Revenue from trading in fixed-income, currencies and commodities markets rose 1.2 percent to $1.18 billion, excluding accounting adjustments. That compares with the $1.19 billion average of four analysts surveyed by Bloomberg. Equity-trading revenue of $1.77 billion fell 7.1 percent from a year earlier, beating analysts’ $1.68 billion estimate.
Blankfein, 61, who has resisted calls to scale back in bond trading, may cut more than 5 percent of traders and salesmen in that business this quarter, a person with knowledge of the matter said last week. Morgan Stanley said in December it was taking a $150 million severance charge as it pared its fixed-income trading business. The cuts affected 1,200 employees, a person briefed on the matter said.
On Tuesday, Morgan Stanley and Bank of America Corp. said profit improved as expenses shrank. Cost cuts also bolstered results at JPMorgan Chase & Co. and Citigroup Inc., which reported earnings last week.