Goldman profits drop 56% in Q4 as revenues fall

All that glitters is...

Goldman Sachs saw its Q4 profit fall by 56% as trading and investment banking revenue fell, but earnings managed to top analyst estimates as reduced expenses offset the lower revenue and the bank benefited from a lower tax rate. Earnings came in at $1.84 per share, topping Wall Street’s estimate of $1.24. Revenue fell 30% to $5 billion, the second-lowest quarterly figure for the bank since the financial crisis; however operating expenses fell by 7% to $4.8 billion and the bank’s tax provision of $234 million was down 78%, helping to protect the bottom line.

For the full year, return on equity was 3.7%, a far cry from the 30%-plus returns it was posting pre-2008. Cost cutting was a key focus, and the bank cut ties with 2,400 employees over the course of the year, and compensation fell to $12.2 billion ($367,057 per employee) from $15.4 billion ($430,700 per employee) in 2010.

In 2012, CFO David Viniar said the company is looking to boost its total cost cutting measures from $1.2 billion to $1.4 billion; a plan which he said is almost in place. Despite the major focus on costs, Viniar said that the bank’s future bottom line growth must come from higher revenue as opposed to cost cutting.

Goldman Sachs (GS : NYSE : US$104.31), Net Change: 6.63, % Change: 6.79%, Volume: 17,912,169

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

About the Author

Canaccord Genuity Inc. is a global investment banking and institutional brokerage firm. Their website is www.canaccordgenuity.com.

For disclosures of any equities mentioned here please see: http://www.canaccordgenuity.com/en/ODD/pages/disclosures.aspx.

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