Goldman Sachs Group’s earnings dropped 52 per cent, the third straight quarterly decline, as a slowdown in trading and investment banking reduced revenue more than analysts estimated. The shares fell by the most in almost two months.
Fourth-quarter net income decreased to $2.39 billion, or $3.79 a share, from $4.95 billion, or $8.20, a year earlier, the New York-based company said today in a statement. Estimates of 22 analysts surveyed by Bloomberg averaged $3.79 a share.
Chief Executive Officer Lloyd C Blankfein, 56, worked to maintain Goldman Sachs’s profitability and reputation last year as client-trading revenue dropped 33 per cent from a record in 2009 and the bank settled a civil fraud lawsuit filed by a US regulator. Last week Goldman Sachs released a set of new business practices and changed financial reports to separate client-trading revenue from gains and losses generated by bets with its own money.
“We would see this as a disappointing performance and remain concerned that fixed-income revenues will remain weak into 2011,” Richard Staite, an analyst at Atlantic Equities in London, said in a note to clients after earnings were released.
Goldman Sachs declined $4.52, or 2.6 per cent, to $170.16 at 9.59 am in composite trading on the New York Stock Exchange, the biggest drop since November 22. The shares gained 3.9 per cent this year through yesterday.
Revenue decline
Goldman Sachs’s full-year revenue fell 13 per cent to $39.2 billion in 2010 from $45.2 billion in 2009, the firm said. In the fourth quarter, revenue dropped 10 per cent to $8.64 billion. The average estimate of 14 analysts in a Bloomberg survey was $8.86 billion in revenue.
“We are seeing signs of growth and more economic activity and we are well-positioned to help our clients expand their businesses, manage their risks and invest in the future,” Blankfein said in the statement.
More From This Section
Compensation pool at Goldman cut to $15.4 bn
Goldman Sachs’s compensation and benefits expense fell 5 per cent to $15.4 billion in 2010 as the firm’s revenue decreased 13 per cent and the number of employees climbed.
The amount, equal to 39 per cent of revenue, is enough to pay each of the firm’s 35,700 employees $430,700. That’s down 14 per cent from an average of $498,246 for the firm’s 32,500 workers a year earlier.
After setting an all-time high for Wall Street pay in 2007, Goldman Sachs cut compensation costs to 36 per cent of revenue in 2009, the lowest ratio ever