David M. Solomon, President and CEO of Goldman Sachs, Speaks at the Milken Institute's 22nd Annual Global Conference in Beverly Hills, April 29, 2019
Mike Blake | Reuters
Goldman Sachs on Tuesday had a fourth-quarter profit below analysts' expectations as the bank's operating costs rose 23% due to higher salaries for Wall Street workers and increased litigation.
Here are the numbers:
- Earnings: $ 10.81 per share against the $ 11.76 estimate according to Refinitiv
- Revenue: $ 12.64 billion against USD 12.08 billion estimate.
The bank said its quarterly profit fell 13% to $ 3.94 billion, or $ 10.81 per share. While analysts had expected a slowdown in trading to affect the quarter, stock desk revenue was $ 300 million below the estimate of $ 2.43 billion.
The bank's shares fell 4.1% in pre-market trading.
Goldman Sachs has thrived over the past two years - a booming period in the capital markets that suited the bank's Wall Street-centric business model.
How will CEO David Solomon's bank navigate the next phase?
The question is timely because the red-hot trading markets of the past year are expected to cool in 2022. In particular, fixed income trading is expected to fall in the fourth quarter.
It is expected to be offset by robust investment banking revenues amid a high rate of mergers and SPACs. Analysts will be eager to ask Solomon what the transaction pipeline will look like in early 2022.
While trading revenue is expected to normalize from a record period, retail banks have gained the favor of investors recently. This is because major banking peers like Wells Fargo and Bank of America are expected to thrive when interest rates rise.
Goldman's start-up retail banking business is still a relatively small contributor to the bottom line, but analysts want to know how management expects to capture new opportunities in fintech.
In addition to its Marcus consumer banking division, with loans, savings and a personal finance app, it includes a new cash management offering for businesses and Goldman's entry into cloud computing for hedge fund customers.
Shares of Goldman have fallen less than 1% this month before Tuesday after rising 45% last year.
Last week, JPMorgan Chase, Citigroup and Wells Fargo all posted fourth-quarter results that topped estimates, but the shares of JPMorgan and Citigroup were sold for higher-than-expected costs. Bank of America and Morgan Stanley close major bank earnings on Wednesday.
This story is evolving. Please come back for updates.