Goldman Sachs drops as 4th-quarter earnings miss estimates on equity trading decline

• Goldman Sachs stock fell 9% on Tuesday after it reported a rare earnings miss in its fourth-quarter earnings.
• The investment bank reported Q4 earnings per share of $10.81, missing estimates by $1.00.
• Goldman also reported a surge in its provision for credit losses due to growth in credit card balances.
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Goldman Sachs stock fell as much as 9% on Tuesday after the investment bank reported a rare miss in its fourth-quarter earnings report.

The bank saw continued strength in its investment banking division thanks to higher revenues in financial advisory, underwriting, and corporate lending services. Despite the strength, there are hints its investment banking momentum is beginning to slow due to a decline in its backlog.

Goldman also reported continued growth in its consumer and wealth management business, though this segment only represents about 13% of its full-year revenue mix.

Here were the key numbers:

Revenue: $12.64 billion, versus analyst expectations of $12.13 billion
Earnings per share: $10.81, versus analyst expectations of $11.81
Provision for credit losses: $344 million, compared to $293 million in Q4 2020

Goldman's Global Markets business saw revenue decline 7% year-over-year to $3.99 billion in the quarter. Those results also reflect a 29% drop over the third quarter of 2021. The decline was mostly in its equity trading business, while fixed income remained flat.

The weakness could continue into 2022 as the stock market sees a continued drawdown due to a tightening Federal Reserve and surging bond yields.

Goldman also reported a spike in its provision for credit losses in the fourth quarter to $344 million, mainly due to rising consumer credit card balances. Goldman's provision for credit losses was only $175 billion in its third quarter, representing an increase of nearly 100%.

Meanwhile, fourth-quarter operating expenses jumped 23% year-over-year and 10% quarter-over-quarter to $7.27 billion. The increase reflects higher compensation and benefits expenses for its employees as well as an increase in provisions for litigation and regulatory proceedings.

Return on average common shareholders' equity stood at 15.6% in the fourth quarter, while return on average tangible common shareholders equity was 16.4%.

"2021 was a record year for Goldman Sachs. The firm's extraordinary performance is a testament to the strength of our client franchise and people," Chairman and CEO David Solomon said.