Goldman Sachs misses profit forecasts as legal costs double to more than $1 billion
- Goldman Sachs posted its fourth-quarter earnings Wednesday morning, missing the lowest analyst estimate for quarterly profit.
- The firm's bottom line was hit by $1.09 billion in litigation expense for the quarter, more than double what it absorbed in the fourth quarter of 2018.
- The bank beat expectations for revenue, with its investment banking, equities trading, and fixed-income trading businesses all performing better-than-expected.
- Goldman stock traded as much as 0.4% lower following the report's release.
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Goldman Sachs on Wednesday announced fourth-quarter earnings that missed the lowest estimate from Wall Street analysts.
The firm's bottom line was hit by $1.09 billion in litigation expense for the quarter, more than double what it absorbed in the fourth quarter of 2018. The last time Goldman posted a back-to-back miss on non-adjusted earnings per share was in 2011.
The expense overshadowed a strong quarter for revenue. Goldman's investment-banking, equities-trading, and fixed-income trading businesses all posting better-than-expected figures, relative to consensus estimates compiled by Bloomberg.
Goldman stock sank as much as 1% in early trading on Wednesday.
Here are the key numbers:
- Revenue: $9.96 billion, versus the $8.56 billion estimate
- Earnings per share: $4.69, versus the $5.52 estimate (lowest estimate was $5.01)
- Investment-banking revenue: $2.06 billion, versus the $1.83 billion estimate
- Equities sales and trading revenue: $1.71 billion, versus the $1.72 billion estimate
- Fixed-income sales and trading revenue: $1.77 billion, versus the $1.04 billion estimate
The losses follow a third-quarter hit from its investments in souring unicorn companies including WeWork and Uber.
The bank was recently in talks to pay a fine of just under $2 billion to resolve an investigation into its role in the 1MDB scandal. The controversy involved allegations that two of the bank's employees and a Malaysian government adviser stole much of the $6.5 billion Goldman raised for a government fund. Prosecutors said the bank netted roughly $600 million in fees through the work, and did little to stop the malpractice or heed warning signs of illegal activity.
The deal, first reported by The Wall Street Journal on December 19, would also involve the bank admitting guilt to the US government. The bankers associated may still face a criminal trial in Malaysia, the nation's attorney general told Bloomberg the following day.
Goldman's report follows earnings releases from Wells Fargo, JPMorgan Chase, and Citigroup on Tuesday. Wells Fargo sank after missing expectations for profit and revenue, while the other two firms beat projections and enjoyed moderate stock jumps through the trading day.
Goldman traded at $244.81 per share as of 7:45 a.m. ET Wednesday, up roughly 6.9% year-to-date.
The bank has 16 "buy" ratings, nine "hold" ratings, and two "sell" ratings from analysts, with a consensus price target of $256.56, according to Bloomberg data.
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