Goldman Sachs Group Inc. (NYSE:GS) says it will set an expense target at its investor day later this month. The move came after the bank missed Wall Street profit expectations due to inflated costs.
A big portion of Goldman’s bloated expense line came from setting aside another $1.1 billion to cover legal and regulatory costs related to the 1MDB Malaysian corruption scandal.
However, Goldman also spent more on compensation, technology, occupancy costs and professional fees, some of which pertained to new businesses like the credit card it launched with Apple Inc. called "APPL.O" and its transaction banking business.
The bank’s operating expenses rose 42% in the fourth quarter and 6% for the full year. Overall, the bank spent 68 cents for every dollar of revenue it produced in 2019, up from 64 cents per dollar the prior year.
Investors watch that efficiency metric closely, to gauge how well a company manages costs.
Management now plans to offer an expense target "in very concrete terms" at its investor day on January 29. Goldman also said it will move away from a $5-billion U.S. fresh annual revenue target it outlined in 2017. The bank will instead set measures for returns and efficiency, which better represent its goals.
Goldman shares rose 0.3% to $246.34 in after hours trading Wednesday.
