Banking & Finance

Not Even Goldman Sachs Escapes Bank Earnings Drag

Goldman Sachs
Source: Wikimedia Commons
Goldman Sachs Group Inc. (NYSE: GS) reported fourth-quarter and full-year 2014 results before markets opened Friday. For the quarter, the investment bank and financial services giant reported diluted earnings per share (EPS) of $4.38 on revenue of $7.69 billion. In the same period a year ago, the bank reported EPS of $4.60 on revenue of $8.78 billion. Fourth-quarter results also compare to the consensus estimates for EPS of $4.32 on revenue of $7.64 billion.

For the full year, EPS totaled $17.07 on revenues of $34.53 billion. In 2013, the bank posted EPS of $15.46 on revenues of $34.21 billion. The consensus estimates called for EPS of $16.99 on revenues of $34.46 billion.

Investment banking revenues in the quarter fell 16% year-over-year and 2% sequentially to $1.44 billion. Financial advisory revenues rose 18% to $692 million on an increase in mergers and acquisitions. Institutional client services revenues fell 8% year-over-year to $3.15 billion, and were 17% lower sequentially.

The drop in institutional client services was attributed to “significantly lower net revenues in credit products and lower net revenues in mortgages,” partially offset by “significantly higher net revenues in commodities and higher net revenues in both currencies and interest rate products.”

Net earnings for the full year rose 5% from $8.04 billion to $8.48 billion this year. Net earnings for the quarter, however, fell 7% year-over-year and 3% sequentially.

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The bank’s profits for the year and for the quarter were large due to lower non-compensation expenses, which fell 4% for the year and 17% for the quarter. Provisions for litigation expenses in the fourth quarter dropped to $161 million from $561 million a year ago. Impairment charges also dropped in the quarter, from $196 million a year ago to $110 million.

Bank CEO Lloyd Blankfein said:

We are pleased with our performance during a year characterized by mixed global economic and financial conditions. The depth of our global client franchise and our continued discipline on expenses and capital management produced a solid return for our shareholders. Looking ahead, we see evidence of a continued pick up in momentum for the global economy that will improve the opportunity set for 2015.

Goldman increased its Basel III Tier 1 common ratio to 12.2% in the second quarter.

The bank did not offer guidance in its press release, but the consensus estimates call for first-quarter EPS of $4.22 on revenues of $9.25 billion. The EPS estimate for the 2015 fiscal year is now $17.28 on revenues of $34.24 billion.

Shares traded about 2% lower in the premarket Friday to $174.99. The current 52-week range is $151.65 to $198.06. Thomson Reuters had a consensus analyst price target of around $192.70 before the results were announced.

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