Goldman Sachs results beat estimates, helped by trading

AP News
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Posted: Jan 18, 2017 9:47 AM
Goldman Sachs results beat estimates, helped by trading

NEW YORK (AP) — Goldman Sachs reported fourth-quarter earnings that beat analysts' forecasts Wednesday as the bank recovered from a difficult quarter a year earlier. Results were particularly strong at Goldman's trading desks in the last three months of the year.

The New York-based investment bank earned $2.35 billion, or $5.08 a share, compared with $765 million, or $1.27 per share, in the same period a year earlier. Last year's results included a $5 billion legal settlement with the Department of Justice related to the bank's dealings during the housing bubble and financial crisis.

The results beat analysts' expectations of $4.76 per share.

"After a challenging first half, the firm performed well for the remainder of the year as the operating environment improved," CEO Lloyd Blankfein said in a statement.

Like Morgan Stanley, which reported its results on Tuesday, Goldman had a strong quarter in its trading operations, benefiting from a market rally following the U.S. presidential election.

In Goldman's institutional client services division, which includes the firm's trading desks, revenue surged 25 percent to $3.6 billion. Revenue in its fixed-income, currencies and commodities division jumped 78 percent to $2 billion.

The strong performance in trading helped lift the firm's return on common equity, a metric used by investment banks to measure how well they did based on how much capital they have, to 11.4 percent in the quarter. Banks typically set a goal for a return on equity above 10 percent.

In other businesses, investment banking revenue fell 4 percent to $1.49 billion, due to lower advisory revenue. Revenue from bringing companies public also declined.

In a sign of the challenging year Goldman had, the firm set aside $11.65 billion for bonuses and compensation this year, down 8 percent from a year earlier. Goldman employees are largely paid in year-end bonuses that reflect their work at the firm, but those bonuses can shrink if the firm's performance lags.

Overall revenue was $8.17 billion, also beating Street forecasts. Five analysts surveyed by Zacks expected $7.43 billion.

For the year, the company reported profit of $7.4 billion, or $16.29 per share. Revenue was $30.61 billion.

Goldman's stock has declined 1.5 percent since the beginning of the year, while the Standard & Poor's 500 index has risen slightly more than 1 percent. The stock has climbed 46 percent in the last 12 months.

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This story was partially generated by Automated Insights (http://automatedinsights.com/ap) using data from Zacks Investment Research. Access a Zacks stock report on GS at https://www.zacks.com/ap/GS