Litigation costs dent Goldman Sachs’s fourth-quarter profit
Goldman Sachs suffered a fall in profit in the final quarter of the year as high litigation provisions and investment banking weakness dented the Wall Street giant’s bottom line.
Net earnings fell 26 per cent year on year to $1.72bn. The fall in profit took earnings per share to $4.69 in the fourth quarter from $6.04 a year earlier, falling well below analysts’ expectations of $5.47.
The lender did not give precise details of the litigation provisions, but it is likely they will cover for costs associated with the 1MDB money-laundering scandal that has plagued the bank in recent years.
Revenue at the investment banking arm fell six per cent to $2.06bn in the final quarter, as mergers and acquisitions and corporate lending cooled.
Goldman Sachs shares were broadly flat an hour after the bell, at $245.54.
Despite the slip in net earnings, revenue rose 23 per cent in the final three months of 2019 to $9.96bn. It was boosted by a 63 per cent surge in fixed income revenue.
Today’s results were the first Goldman has published under a new structure that more clearly states the size of its consumer business, which includes its online bank Marcus.
Chief executive David Solomon has focused on beefing up the lender’s consumer arm due to fears that the investment business is too much at the mercy of swings in the market.
Revenue at the nascent consumer business jumped 23 per cent year on year to hit $228m in the fourth quarter.
Solomon said: “Strong performance in the fourth quarter helped us to deliver solid results for the year, while continuing to invest in new businesses.”
Net revenue for 2019 was $36.55bn, effectively unchanged from 2018’s take of $36.62bn.
He added: “We aim to drive higher returns in the future, and look forward to sharing our strategic goals and financial targets at investor day later this month.”
Goldman is preparing for its first investor day since the firm went public at the turn of the century. Solomon will lay out his plans for the consumer business, including Marcus and the Apple card.