Goldman Sachs (NYSE:GS) on Tuesday posted fourth-quarter profit below analysts’ expectations as the bank’s operating expenses surged 23% on higher pay for Wall Street workers and increased litigation reserves.
The bank said quarterly profit fell 13% from a year earlier to $3.94 billion, or $10.81 a share, below the $11.76 estimate of analysts. While analysts had anticipated that a slowdown in trading would impact the quarter, equities desks posted revenue that was $300 million below the $2.43-billion estimate.
Still, companywide revenue in the quarter jumped 8% from a year earlier to $12.64 billion, more than $500 million above the consensus estimate, on gains in investment banking and wealth management.
Just as at rivals JPMorgan Chase (NYSE:JPM) and Citigroup (NYSE:C), Goldman Sachs saw expenses rise in the quarter as the firm had to pay employees more after another year of outperformance.
Both trading and investment banking operations have thrived during the coronavirus pandemic, thanks to a booming period in capital markets that suited Goldman’s Wall Street-centric business model.
Goldman said operating expenses jumped 23% to $7.27 billion in the quarter, exceeding the $6.77 billion estimate of analysts. The bank cited "significantly higher" pay and benefits for its employees, technology expenses and $182 million set aside for litigation and regulatory costs, compared with $24 million in the year-earlier period.
GS shares declined $27.16, or 7.1%, to $357.78 first thing Tuesday.
