Goldman Sachs Stock Drops 7% After Earnings Miss Expectations

A slowdown in equities trading and surging expenses were blamed for the lower-than-anticipated share prices.

Interested in the Monthly Monitor Investment Letter?


Goldman Sachs has announced its fourth-quarter earnings were below analyst expectations, likely owing to surging operating expenses, which were 23 percent higher. According to Refinitiv, the bank’s earnings were lower than the $11.76 estimate and landed at $10.81 per share. Goldman’s revenue was $12.64 billion compared to the estimate of $12.08 billion.

The investment bank said its quarterly profit also dipped by 13 percent in a year-to-year comparison.

While analysts had predicted that there would be a slacking off of trading that would affect the final quarter of 2021, it was more than expected. Equities had revenue of $300 million below the estimate of $2.43 billion.

But corporate-wide revenue for the quarter soared by 8 percent from last year to $12.64 billion in wealth management and investment banking gains. That was $500 million more than estimates.

Expenses were higher as they have been with other banks such as Citigroup and JPMorgan Chase. Goldman Sachs had to pay its employees a “significantly higher” salary and benefits package. Technology expenses were also higher, and the bank put aside $182 million for regulatory and litigation costs compared to $24 million last year.  But investment and trading divisions have done well during the pandemic, owing to a capital market boom that fit Goldman Sachs’s Wall Street activities.

The firm said its operating expenses jumped up to $7.27 billion for the quarter, or 23 percent higher, and it exceeded FactSet analysts’ estimate of $6.77 billion.

CEO of Opimas Octavio Marenzi said, “Goldman Sachs’ disappointing Q4 earnings are a stark reminder that wage inflation is hitting the banking sector hard. It is clear that employees are able to demand significantly higher pay.” Opimas is a bank consultancy firm.

David Solomon, CEO of Goldman Sachs, said that the bank had a banner year considering metrics. For instance, the bank hit a record for its full-year profit and revenue while posting the most significant returns in over a decade.

Revenue from Goldman’s investment banking division saw a 45 percent jump in the final quarter of 2021, reaching $3.8 billion. The final tally beat analysts’ estimates by nearly $550 million. The firm’s global markets asset management division posted revenue of $2.89 billion during the quarter and topped a $2.51 billion estimate. Its consumer and wealth management arm had revenue of $1.97 billion that was on par with the expectations of analysts.




Please enter your comment!
Please enter your name here