Goldman Sachs earnings fail in estimates of higher costs, mergers and weak acquisitions

(Reuters) – Goldman Sachs Group Inc (GS.N) reported quarterly earnings on Wednesday that did not reach analyst estimates by a wide margin, damaged by weakness in its investment banking business and higher operating costs.

FILE PHOTO: The teletype symbol and the Goldman Sachs logo are displayed on a screen on the floor of the New York Stock Exchange (NYSE) in New York, USA. USA, December 18, 2018. REUTERS / Brendan McDermid / File Photo

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.

Investment bank revenues fell 6% to $ 2.06 billion, affected by lower merger and acquisition advisory fees, as well as a slowdown in corporate loans.

However, total net revenues increased 23% to $ 9.96 billion, as three of its four main lines of reports performed strongly.

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.

Operating expenses increased 42% to $ 7.3 billion.

The provision for credit losses increased 51% to $ 336 million in the fourth quarter, while the bank recorded net provisions of $ 1.24 billion for 2019, mainly due to legal costs related to the litigation of 1MDB.

Under the command of executive director David Solomon, Goldman has undertaken a major change in strategy from its focus on trade to the construction of a larger consumer business in an attempt to protect its revenues from sudden changes in financial markets.

Last week, Goldman unveiled the size of its consumer business for the first time. The unit, which includes online retail bank, Marcus, and its credit card business, reported a 23% 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.

Reports of Anirban Sen in Bangalore and Elizabeth Dilts in New York; Edition by Anil D’Silva

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