Goldman Sachs tops revenue expectations, but quarterly profit hit by $1.1 billion legal bill

Earnings

Goldman Sachs beat analysts’ estimates for revenue as the bank joined its Wall Street rivals in posting sharply higher fourth-quarter bond trading results. 

The bank on Wednesday posted quarterly revenue of $9.96 billion, a 23% increase that exceeding the $8.51 billion estimate by more than $1 billion.

The New York-based bank’s global markets division, by far its largest business, posted a 33% increase in revenue to $3.48 billion as bond trading revenue jumped 63% to $1.77 billion, exceeding the $1.16 billion estimate. Stock trading climbed 12% to  $1.71 billion, essentially matching analysts’ estimate. 

Another factor in the bank’s revenue beat was the 52% increase in asset management revenue to $3 billion on gains in public and private equity holdings. That is an activity that used to be disclosed in its investing and lending division before the bank changed its reporting lines this month. 

CEO David Solomon has had a busy few months. Last week, Goldman disclosed that it is reorganizing its businesses to more closely resemble its big-bank peers and give retail banking operations its own category for the first time. It also released a mobile app for its Marcus consumer finance business.

The bank is also in advanced negotiations with the U.S. Department of Justice to pay about $2 billion to resolve an investigation into Goldman’s 1MDB scandal, according to people with knowledge of the matter. The firm will likely have to create an independent monitor to oversee compliance efforts, the people said.

But more importantly to investors, later this month Goldman is holding its first-ever investor day, where Solomon will disclose the results of a business review and his plans to turbocharge growth and hit new financial targets.

Goldman shares climbed 37% last year, but the bank still has the lowest valuation among the big six U.S. lenders, a situation Solomon would like to remedy.

On Tuesday, J.P. Morgan and Citigroup both posted profit that beat analysts’ expectations on surging bond-trading results and strong revenue from credit-card operations. Wells Fargo missed analysts’ profit estimates as it booked costs tied to its fake accounts scandal.

Here’s what Wall Street expected:

Earnings: $5.47 a share, a 9.5% decline from a year earlier, according to Refinitiv.

Revenue: $8.51 billion, a 5.3% increase from a year earlier.

Trading Revenue: Fixed Income $1.16 billion, Equities $1.72 billion.

Investment Banking Revenue: $1.86 billion.

This story is developing. Please check back for updates.

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