Goldman Sachs reported a drop in trading revenues in the final quarter of last year, as a $5.1bn legal settlement with US authorities soured its bottom line.
The US investment bank reported profits of $765m, or $1.27 a share, which were hit after the lender last week struck an agreement to settle allegations it mis-sold mortgage-backed bonds in Wall Street’s boom before the financial crisis. In the year ago quarter, Goldman generated profits of $2.2bn, or $4.38 a share.
Overall revenues for the quarter fell to $7.3bn from $7.7bn a year ago.
With the legal charge already flagged by the bank, investors’ focus remains on the performance of its fixed income, currencies and commodities business (FICC). Chief executive Lloyd Blankfein (pictured), whose own path to the top came via its trading division, has insisted post crisis regulations haven’t sent the business into terminal decline.
However, revenues last quarter from its fixed income, currencies and commodities business fell 8 per cent to $1.12bn.
It was a quarter marked by the Federal Reserve’s historic decision to raise interest rates, a further easing from the European Central Bank and the strongest rally in US stocks in two years.
A drop in commodity revenues more than offset a better showing from fixed-income, Goldman said, as it also reported a 9 per cent decline in equities revenues from a year ago to $1.76bn.
Goldman, which began life in 1869 in New York’s financial district, has been leaning more heavily on its investment bankers to generate profits from the boom in mergers and acquisitions. The business delivered in the quarter.
Spanning everything from fees collected advising chief executives on deals to those pocketed underwriting debt issuance, revenues at its investment bank rose 7 per cent to $1.55bn in the period. Advisory fees jumped 27 per cent to $879m.
A resurgent stock market in the final quarter of 2015 failed to lift revenues at Goldman’s investing and lending business, which includes stakes in publicly-traded companies. They fell 15 per cent to $1.30bn, with the bank arguing the drop was “driven by a significant decrease in net gains from investments in public equities.”
Goldman shares have fallen 11.5 per cent over the last 12 months, underperforming the 6 per cent decline in the KBW Bank index.