Goldman Sachs earnings miss estimates on weak equity trading

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The Goldman Sachs logo is seen on the floor of the New York Stock Exchange (NYSE) in New York, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly

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Jan 18 (Reuters) – Earnings at Goldman Sachs Group Inc (GS.N) fell nearly 13% and missed expectations on Tuesday as a less volatile stock market hurt business and dampened a bumper year for investors. transactions, sending shares of the leading Wall Street investment bank down 4%.

Bank profits were hit this quarter by weak trading volumes as the Federal Reserve slowed the pace of its asset purchases after an 18-month period of injecting liquidity into capital markets to mitigate the impact of the COVID-19 pandemic.

Goldman’s business unit reported lower fourth-quarter profit than a year earlier as a more stable economy led to less fluctuation in financial markets.

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Its revenue from global markets business, which houses trading business and accounts for about a third of the bank’s overall revenue, fell 7% to nearly $4 billion, due to weakness in equity trading. and fixed income securities.

Compared to a strong quarter a year ago, when trading volumes soared, the bank said equity underwriting revenue fell 8% due to lower revenue from offerings. secondary actions.

While net income from fixed income was flat from a year earlier at $1.86 billion, equity income fell 11%. Net revenues in global markets were also 29% lower than in the third quarter of 2021.

Like rivals, Goldman’s trading slowdown eclipsed a 45% rise in investment bank revenue to $3.80 billion as its top rainmakers raked in record fees advising on some of the biggest mergers , initial public offerings and agreements involving special purpose acquisition companies.

The country’s biggest bank, JPMorgan Chase & Co (JPM.N), also faced a slowdown in its trading arm last week, which sent its shares down as much as 6%, with analysts worrying about its forecasts of future profitability. Read more

Goldman’s net income attributable to common shareholders fell to $3.81 billion in the quarter ended Dec. 31 from $4.36 billion a year earlier.

Earnings per share fell to $10.81 from $12.08 a year earlier. Analysts on average had expected earnings of $11.76 per share, according to Refinitiv data.

Total net income rose 8% to $12.64 billion, driven by its investment banking and asset and consumer management units.

A bright spot during the quarter was Goldman’s consumer bank, Marcus. Although the unit is much smaller than traditional Main Street lenders, it grew 8%, thanks to higher credit card and deposit balances.

Wage inflation and the cost of investing in new technologies also weighed on bank profits. Goldman’s operating expenses jumped 23%, indicating significantly higher compensation and benefits costs.

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Reporting by Noor Zainab Hussain and Niket Nishant in Bengaluru and Matt Scuffham in New York; Editing by Arun Koyyur

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