Goldman Sachs Group (GS) moved firmly lower Tuesday after the investment bank posted weaker-than-expected fourth quarter earnings amid a slump in investment banking revenues and a bigger-than-expected booking for potential credit losses.
Goldman said earnings for the three months ending in December were pegged at $1.33 billion, or $3.32 per share, down from $10.81 over the same period last year and firmly shy the Street consensus forecast of $5.48 per share. Group revenues, Goldman said, fell 16.2% to $10.59 billion, and again missed analysts' forecasts of an $10.83 billion total.
Investment banking revenues fell 48% from last year to $7.36 billion, Goldman said, but that partly offset by a $32.5 billion in net revenues from its global banking and markets division. Merger activity, however, fell around 40% last year from record 2021 levels, according to Refinitiv data, with a 56% contraction over the fourth quarter.
Fixed income revenues topped forecasts at $2.69 billion, while equity market sales were pegged at $2.07 billion.
Goldman also set-aside $972 million to cover potential losses in its credit and loan divisions, a 182% increase from the $344 million provision in booked over the fourth quarter of last year.
“Against a challenging economic backdrop, we delivered double-digit returns for our shareholders in 2022," said CEO David Solomon. "Our clear, near term focus is realizing the benefits of our strategic realignment which will strengthen our core businesses, scale our growth platforms and improve efficiency. The foundation of all of our strategic efforts is our client franchise, which is second to none.”
Goldman Sachs shares were marked 6.1% lower in the final hour of Tuesday trading following the earnings release to change hands at $3451.20 each, a move that would trim the stock's six-month advance to around 16.6%.
Earlier this month, Goldman unveiled plans to eliminate around 3,200 positions, the bulk of them centered around its trading and banking divisions, following a traditional end-of-year review lead by Solomon.
Solomon told employees in late December in a company-wide memo that a "variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity" are weighing on the bank's prospects and warned that a "headcount reduction will take place in the first half of January".
