Goldman Sach’s Q4 profit tumbled 65% amid weak trading and a hefty regulatory fine.
The New York-based bank said its fourth-quarter net income fell to $765 million, or $1.27 a share, from $2.17 billion, or $4.38 a share, a year earlier. The decline was mostly the result of a $5 billion settlement Goldman announced last week with the Justice Department and other law enforcement authorities over the firm’s mortgage-bond sales practices leading up to the financial crisis. Without the fine, Goldman would have posted an earnings increase.
The Wall Street firm’s results cap a fourth-quarter earnings season for banks that was dominated by weak trading results and worries about whether the sharp fall in energy prices and a slowdown in China’s economic growth would sting the financial industry. “Clearly, it’s been a challenging environment for the entire industry,” Chief Financial Officer Harvey Schwartz said on a conference call with analysts, adding that the firm’s annual revenue had hovered around the same level of $34 billion for four consecutive years.
On Tuesday, one of Goldman’s closest competitors, Morgan Stanley, detailed significant cutbacks in fixed income and elsewhere. The firm’s chief executive, James P. Gorman, argued that regulation had changed the firm’s long-term business outlook in ways that it had not anticipated a year ago. Goldman Sachs has also been struggling in fixed income, a business that comes with much higher regulatory costs than it has in the past. In the fourth quarter, the business reported 8 percent lower revenue than it did a year ago. For the year, fixed-income revenue was down 13 percent.
Goldman Sachs Group Inc (GS.N), the 2015 M&A champion, is putting a brave face on the prospects for its dealmaking business this year even with markets plunging. The Wall Street firm, which last year topped the global dealmaking charts, is not yet concerned about the impact declining oil prices and China’s slowing economy will have on dealmaking. “We’ll have to see, obviously, if markets stay under stress … but we wouldn’t say that two weeks of volatile markets would stop a pretty powerful M&A trend,” Goldman CFO Harvey Schwartz said on the bank’s fourth-quarter analyst call on Wednesday.