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Goldman Sachs sees a decline in quarterly profit due to a massive $1.1 billion litigation charge

Michael Harris
  • January 16th, 10:12
  • Last Updated: January 16th, 10:16
  • Goldman Sachs beats analysts' estimate for revenue in the fourth quarter.
  • Quarterly profit takes a hit due to a massive $1.1 billion litigation charge.
  • Goldman Sachs didn't budge in the stock market following the earnings report.
  • Goldman Sachs gained 37% in 2019 but remained the weakest among its competitors in terms of market value.

As per the quarterly performance report on Wednesday, Goldman Sachs beat analysts’ forecast for revenue. In terms of quarterly profit, however, the American multinational investment bank fell shy of the estimate due to a massive litigation charge of $1.1 billion.

According to Refinitiv’s data, analysts had expected the financial services company to note $8.51 billion in revenue. Wednesday’s report, on the other hand, recorded Goldman Sachs to have generated a much larger $9.96 billion in its recent quarter that marked a 23% increase for the bank.

Goldman Sachs Quarterly Earnings Missed Analysts’ Estimate

On the earnings front, experts had estimated $5.47 of earnings per share (EPS) for Goldman Sachs in the fourth quarter. Owing to the litigation charge, however, the EPS remained capped that a much lower $4.69 that marked a 22% decline for the bank. Excluding the litigation charge related to Goldman Sach’s 1MDB scandal, the investment bank made $7.64 of earnings per share.

While the stock was trading in the red zone earlier on Wednesday, share prices didn’t budge following the release of the Q4 earnings report. Global markets unit marks the biggest business for Goldman Sachs. With a revenue of $3.48 billion, the bank saw a 33% growth in the divisional revenue. Revenue from bond trading, on the other hand, climbed 63% in the recent quarter and generated $1.77 billion for the bank. Lastly, a 12% growth ($1.71 billion) in stock trading revenue was reported in the fourth quarter.

Further optimism in quarterly performance was driven by $3 billion in asset management revenue that marked a 52% increase. Investment banking, however, posted a sharp decline of 6%, generating $2.06 billion in quarterly revenue for the financial services company. The drop was largely associated with the loss of pace in the merger activity towards the end of the last year.

New Consumer & Wealth Management Division Generated $1.41 Billion In Quarterly Revenue

Goldman Sachs had recently established a consumer and wealth management division. In this segment, the investment bank reported $1.41 billion in revenue that hiked by 8%.

In a recent announcement, the investment bank had announced that its retail banking operations will have a separate category in the upcoming months as part of a broader reorganizing strategy that aims at aligning Goldman Sachs with its big-bank competitors. The bank’s Marcus consumer finance business also released a dedicated mobile application.

Currently trading at $245.21 in the stock market, Goldman Sachs registered a huge 37% growth in 2019. Despite the surge last year, Goldman Sachs is still the weakest in terms of market valuation as compared to its competitors in the league of U.S lenders.

About the author

Michael Harris
Michael Harris
I began trading in my early 20's at a local company and since then have combined my knowledge and love of content to become a news writer. I am passionate about bringing insightful articles to readers and hope to add some value to your portfolios!

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