By Saabira Chaudhuri
Goldman Sachs Group Inc.'s fourth-quarter net income fell 7.1%
as the firm's revenue from trading and investment banking slid.
Shares edged down 0.7% in recent premarket trading as Goldman
turned in the sharpest year-over-year drop in fixed income,
currencies and commodities trading among the U.S. investment banks
that have reported fourth-quarter results so far.
The bank reported net income of $2.17 billion, or $4.38 a share,
compared $2.33 billion, or $4.60 a share, a year earlier. Analysts
polled by Thomson Reuters expected $4.32 a share.
Net revenue fell 12% to $7.69 billion. Analysts expected $7.64
billion.
Goldman's results, more heavily dependent on trading than most
big banks, come after rivals turned in disappointing earnings
reports, largely due a steeper-than-expected falloff in trading
revenue.
On Friday, Goldman reported a 29% fall from a year earlier in
revenue from its large fixed income, currencies and commodities
trading arm, to $1.22 billion.
Earlier this week, Citigroup Inc. and Bank of America Corp.
reported their own FICC revenue fell 16% and 30%, respectively.
J.P. Morgan Chase & Co.'s FICC revenue dropped 23%, or 14%
after adjusting for the sale of certain businesses and other
items.
Through much of 2014, FICC trading revenue at the nation's
biggest banks was dampened by quiet markets, but in the last few
months of the year, banks say they have been grappling with
unexpected bouts of sudden volatility, which also can make it hard
to turn a profit.
Advisory revenue of $692 million was a brightspot, rising 18%
from a year earlier. Underwriting revenue, however, pulled results
lower, with debt underwriting coming in 21% weaker than the
year-earlier quarter at $406 million, and stock underwriting
falling 45% to $342 million.
Overall, investment banking revenue sank 16% from a year earlier
and edged down 1.6% from the third quarter to $1.44 billion.
Goldman showed progress in controlling expenses in the fourth
quarter, slashing overall operating expenses by 14% from a year
earlier and 12% from the prior quarter to $4.48 billion.
Goldman's compensation and benefits expense was $1.96 billion,
down 11% from a year ago and 30% from the third quarter.
The firm typically sets side less for employee pay and other
benefits during the fourth quarter, bringing its full-year costs in
line with past years. Compensation costs are Goldman's biggest
operating expense, and a sharp decline in any quarter will drop to
the bottom line.
The firm's compensation ratio--or the proportion of revenue it
pays out to employees--was 36.8% for the year, roughly flat with a
year earlier.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
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