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New York - Goldman Sachs Group posted a 53% decline in quarterly profit as trading revenue tumbled, spoiling hopes that Wall Street's most influential bank might buck a volatile climate that has hurt rivals such as Citigroup.
Goldman, long known for generous payouts to employees, also said compensation would be down in 2010 from the prior year, but the decline is smaller than the drop in the bank's revenue.
Fourth-quarter profit roughly matched analyst estimates, but revenue fell short. Goldman shares were down 3.1% to $169.32 in premarket trading, and shares of other banks also declined.
"If Goldman Sachs can't show a strong performance, then good luck to anyone else trying," said Simon Maughan, an analyst at MF Global in London.dividends totaled $2.23bn, or $3.79 per share, compared with $4.79bn, or $8.20, a year earlier. Net revenue fell 10% to $8.64bn.
Analysts on average expected profit of $3.76 per share on revenue of $9bn, according to Thomson Reuters I/B/E/S.
"If you're on the wrong side of the trade for even a couple days, that can hurt you substantially, and that seems to have been true for Goldman, as it was for Citi," said Gary Townsend, co-founder of Hill-Townsend Capital in Chevy Chase, Maryland, which owns Goldman stock.
CEO sees growth signs
Goldman emerged from the recent financial crisis as it went in, as one of the most powerful but controversial US banks.
Much recent attention has focused on its dealings with Facebook, including a decision this week to limit a private offering of stock in the Internet social network company to non-US investors.
Nonetheless, Goldman shares have held up far better than those of many rivals. Its shares closed on Tuesday above where they were when the financial crisis exploded in September 2008.
Goldman's fourth-quarter net revenue in fixed income, currency and commodities slid 39% from the third quarter to $1.64bn, reflecting what the bank called "generally low client activity levels."
Bond markets were unsettled during the quarter by uncertainty over European sovereign debt and the impact of the Federal Reserve's treasury-buying programme.
Investment banking net revenue fell 10% in the quarter from what Goldman called a "strong" year-earlier quarter, though it increased 30% from the third quarter.
"Trading for their own account and investment banking are a big piece of what they do," said Malcolm Polley, chief investment officer at Stewart Capital Advisors.
Goldman CEO Lloyd Blankfein in a statement said the bank is "seeing signs of growth and more economic activity" following "difficult" conditions for much of 2010.
Payout down, payout ratio up
In the last week, Citigroup and JPMorgan Chase & Co reported weaker quarterly fixed-income trading results.
Goldman's results may signal what investors can expect when Morgan Stanley and Bank of America report their quarterly figures later this week. Shares of both banks fell in premarket trading.
Much of Goldman's profit will flow to bankers and traders in the form of lucrative year-end bonuses.
Compensation per employee for 2010 fell 14% from 2009 to about $431 000, and total pay and benefits fell 5% to $15.38bn.
Still, the ratio of compensation and benefits to net revenue rose to 39.3% from 35.8%.
For all of 2010, Goldman's profit after preferred stock dividends fell 37% to $7.71bn, or $13.18 per share. Net revenue fell 13% to $39.16bn.
Goldman, long known for generous payouts to employees, also said compensation would be down in 2010 from the prior year, but the decline is smaller than the drop in the bank's revenue.
Fourth-quarter profit roughly matched analyst estimates, but revenue fell short. Goldman shares were down 3.1% to $169.32 in premarket trading, and shares of other banks also declined.
"If Goldman Sachs can't show a strong performance, then good luck to anyone else trying," said Simon Maughan, an analyst at MF Global in London.dividends totaled $2.23bn, or $3.79 per share, compared with $4.79bn, or $8.20, a year earlier. Net revenue fell 10% to $8.64bn.
Analysts on average expected profit of $3.76 per share on revenue of $9bn, according to Thomson Reuters I/B/E/S.
"If you're on the wrong side of the trade for even a couple days, that can hurt you substantially, and that seems to have been true for Goldman, as it was for Citi," said Gary Townsend, co-founder of Hill-Townsend Capital in Chevy Chase, Maryland, which owns Goldman stock.
CEO sees growth signs
Goldman emerged from the recent financial crisis as it went in, as one of the most powerful but controversial US banks.
Much recent attention has focused on its dealings with Facebook, including a decision this week to limit a private offering of stock in the Internet social network company to non-US investors.
Nonetheless, Goldman shares have held up far better than those of many rivals. Its shares closed on Tuesday above where they were when the financial crisis exploded in September 2008.
Goldman's fourth-quarter net revenue in fixed income, currency and commodities slid 39% from the third quarter to $1.64bn, reflecting what the bank called "generally low client activity levels."
Bond markets were unsettled during the quarter by uncertainty over European sovereign debt and the impact of the Federal Reserve's treasury-buying programme.
Investment banking net revenue fell 10% in the quarter from what Goldman called a "strong" year-earlier quarter, though it increased 30% from the third quarter.
"Trading for their own account and investment banking are a big piece of what they do," said Malcolm Polley, chief investment officer at Stewart Capital Advisors.
Goldman CEO Lloyd Blankfein in a statement said the bank is "seeing signs of growth and more economic activity" following "difficult" conditions for much of 2010.
Payout down, payout ratio up
In the last week, Citigroup and JPMorgan Chase & Co reported weaker quarterly fixed-income trading results.
Goldman's results may signal what investors can expect when Morgan Stanley and Bank of America report their quarterly figures later this week. Shares of both banks fell in premarket trading.
Much of Goldman's profit will flow to bankers and traders in the form of lucrative year-end bonuses.
Compensation per employee for 2010 fell 14% from 2009 to about $431 000, and total pay and benefits fell 5% to $15.38bn.
Still, the ratio of compensation and benefits to net revenue rose to 39.3% from 35.8%.
For all of 2010, Goldman's profit after preferred stock dividends fell 37% to $7.71bn, or $13.18 per share. Net revenue fell 13% to $39.16bn.
