Goldman Sachs has today warned its earnings in the final three months of 2015 will take a $1.5bn (£1bn) hit after-tax due to a settlement with regulators.
The firm has agreed to pay to resolve actual and potential claims by the US Department of Justice, the New York and Illinois Attorneys General, the National Credit Union Administration and the Federal Home Loan Banks of Chicago and Seattle. The claims relate to the way the firm packaged and sold mortgage-backed securities from 2005 to 2007.
The investment bank will pay $2.385bn as a civil penalty, make $875m in cash payments, and provide $1.8bn in customer relief. The consumer relief will be in the form of loan forgiveness for underwater homeowners and distressed borrowers, financing for construction, rehabilitation and preservation of affordable housing, support for debt restructuring, foreclosure prevention and housing quality improvement programmes.
"We are pleased to have reached an agreement in principle to resolve these matters,” said Lloyd Blankfein, chairman and chief exec of Goldman Sachs.
However the firm also warned that:
The agreement in principle is subject to the negotiation of definitive documentation, and there can be no assurance that the firm, the U.S. Department of Justice and the other applicable governmental authorities will agree on the definitive documentation.