Goldman Sachs saw earnings fall in the fourth quarter as he prepared to pay billions punished for his role in the 1MDB scandal.
The Wall Street giant announced Wednesday morning that it set aside $ 1.24 billion last year while trying to reach an agreement with the US authorities. UU. And Malaysia in what could require a guilty plea for its role in the international fraud scheme full of stars and billions of dollars fines
The massive reserve took a large part of Goldman’s earnings for the quarter. Despite revenues of $ 9.98 billion, an increase of 23 percent in the quarter, the bank reported earnings per share of $ 4.69, a drop of 22 percent.
The executive president, David Solomon, addressed 1MDB directly at a conference call this morning, saying: “While we cannot guarantee an agreement or the moment if we do, our conversations with the authorities are progressing and remain active.” We are working hard to close this matter as quickly as possible. ”
The 1MDB fraud has an international scandal that made a celebrity in the Malaysian playboy a fugitive Jho Low, who remains accused of having diverted some 4.5 billion dollars from the money from the government fund to live a luxurious lifestyle that included a luxurious lifestyle dating supermodels and funding Martin Scorsese “Wolf of Wall Street.” In a rare interview earlier this month, Low denied that he was the “intellectual author” of the plan.
According to reports, the Malaysian government is still looking to fine Goldman with $ 7.5 billion, which means that the pain could be felt a little more in Goldman’s earnings.
Legal problems occur when CEO Solomon is launching a major change in the strategy to move away from the negotiation, for a long time its main profit engine, towards the construction of a larger consumer business that protects it from sudden changes in Financial markets
In early January, Goldman reorganized most of its main reporting lines and, for the first time, unveiled the size of its consumer business, responding to long-standing requests from more analysts and investors.
Last week, the bank unveiled the size of its consumer business for the first time. The unit, which includes its online retail bank, Marcus, as well as its credit card business, reported a 23 percent increase in revenue to $ 228 million during the fourth quarter.
Rivals JP Morgan Chase & Co, Citigroup and Bank of America have much larger consumer businesses.
“Overall, the lost provision and compensation ratio was higher than expected, so the results appear weak this quarter, excluding capital investment earnings,” said Keefe, Bruyette & Woods analysts in a note to customers.
Despite a fall in earnings, the bank recorded strong revenue growth as three of its four main reporting lines performed strongly.
Revenue from world markets, which houses the commercial business, increased 33% to $ 3.48 billion, thanks in part to the easier comparisons of the previous year when financial markets were affected by the uncertainty related to trade and global growth
Bond trading increased 63% to $ 1.77 billion.
The strong performance of the trade reflected similar trends in other important rivals: JPMorgan Chase, Citigroup and Bank of America.
The only pain point for Goldman during the quarter was investment banking, where revenues fell 6% to $ 2.06 billion, affected by lower merger and acquisition advisory fees, as well as a slowdown in corporate loans.
The bank’s net earnings applicable to common shareholders fell to $ 1.72 billion in the quarter ended December 31 from $ 2.32 billion a year earlier. Earnings per share fell to $ 4.69 from $ 6.04.
Analysts on average expected earnings of $ 5.47 per share, according to the Refinitiv IBES calculation.
Operating expenses increased 42% to $ 7.3 billion.
However, total net income increased 23% to $ 9.96 billion.