By Dhirendra Tripathi
Investing.com – Goldman Sachs stock (NYSE:GS) fell 4% in Tuesday’s premarket as higher expenses and wider provisions pulled down the bank’s fourth-quarter profit on a year-on-year basis.
Weakness in the Wall Street giant’s asset management and global markets businesses also weighed on the earnings.
Quarterly operating expenses surged 23% on the year to $7.3 billion to account for higher spending on technology, litigation provisions and compensation to staff, in what was a record year for both annual revenue and profit. Net provisions for litigation and regulatory proceedings for the fourth quarter were more than seven times higher than last time.
Provision for credit losses shot up 17%, reflecting higher credit card balances at the end of the quarter.
Total revenue for the quarter through December rose 8% to $12.7 billion to top estimates, riding on demand for its investment and consumer banking services.
Investment banking revenue rose 45% to touch $3.8 billion as M&A fees soared and more corporates tapped public markets, all of which generated demand for Goldman’s advisory services. Consumer and wealth management business revenue rose 19%.
Revenue in asset management operations were down 10% as equity investment in public entities took a hit. Investments in debt instruments also yielded lower net gains. Investments in private equity were the saving grace in the bank’s asset management business.
Revenue in the fixed income, currency and commodity business took a hit of 7% to come in just short of $4 billion, reflecting lower demand for intermediation and volatility in markets amid rising government bond yields.
Fourth-quarter net profit fell 13% to $3.93 billion. Adjusted profit per share was $10.81 and fell short of estimates.