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Goldman Sachs Slips as Higher Expenses Weigh, Wealth Business Suffers -Breaking


© Reuters

By Dhirendra Tripathi – Goldman Sachs stock (NYSE:) fell 4% in Tuesday’s premarket as higher expenses and wider provisions pulled down the bank’s fourth-quarter profit on a year-on-year basis.

Weakness in the Wall Street giant’s asset management and global markets businesses also weighed on the earnings.

Quarterly operating expenses surged 23% on the year to $7.3 billion to account for higher spending on technology, litigation provisions and compensation to staff,  in what was a record year for both annual revenue and profit. For the fourth quarter, net provisions for litigation or regulatory proceedings were seven times more than in previous years.

Due to higher credit card balances, 17% more credit loss provision was created.

Topping estimates: The total revenue rose by 8% to $12.7Billion in the December quarter, largely due to demand for their investment banking and consumer services.

Investment banking revenue rose 45% to touch $3.8 billion as M&A fees soared and more corporates tapped public markets, all of which generated demand for Goldman’s advisory services. The 19% increase in revenue from the wealth management and consumer businesses was due to M&A fees.

Asset management revenue fell 10% due to lower equity investments in public bodies. Also, net returns from investments in debt instruments were lower. Investments in private equity were the saving grace in the bank’s asset management business.

Fixed income, currency and commodity revenue took just under $4 billion. The drop was due to lower volatility and demand for intermediation in market despite rising yields on government bonds.

Net profit for the fourth quarter fell by 13%, to $3.93 Billion. An adjusted profit per share of $10.81 was achieved, but it fell short on estimates.


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