Goldman Sachs Misses Q4 Earnings Forecast After $1.1 Billion Litigation Charge

Goldman Sachs booked a $1.1 billion litigation charge that carved into its fourth quarter earnings and clouded stronger-than-expected revenues.

Goldman Sachs Group  (GS) - Get Report posted weaker-than-expected fourth quarter earnings Wednesday under its new reporting format, thanks in part to a litigation charge that clouded solid group revenues.

Goldman said earnings for the three months ending in December came in at $4.69 per share, down 41% from the same period last years and well shy of the $5.46 Street consensus forecast. Litigation charges of around $1.1 billion, linked to the 1MDB scandal in Malaysia, took a notable chunk from the bank's bottom line. Group revenues, Goldman said, rose 23% to 9.96 billion, well ahead of analysts' forecast of an $8.906 billion tally.

Fixed income trading revenues rose to $1.8 billion, Goldman said, compared to $822 million over the same quarter last year, while consumer and wealth management revenues were marked 8% higher at $1.41 billion. 

Goldman Sachs Q4 Earnings graphic

“Strong performance in the fourth quarter helped us to deliver solid results for the year, while continuing to invest in new businesses," said CEO David Solomon. "We aim to drive higher returns in the future, and look forward to sharing our strategic goals and financial targets at Investor Day later this month.”  

Goldman shares were marked 2.4% lower following the earnings release to change hands at $239.76 each, a move that would trim the stock's six-month gain to around 14%.

Earlier this month, Goldman unveiled a shift in the way it publishes quarterly earnings ahead of its first-ever investor day conference on January 29.

Goldman said its new earnings structure will focus on four business units: global markets (formerly institutional client services), investment banking, asset management and consumer and wealth management. The revised structure, which comprise the first major changes for the bank under CEO Solomon, were applied to Wednesday's fourth quarter earnings.

Solomon had promised to reveal a "front-to-back" review of Goldman's business and operations to investors last year, but postponed the findings until January 29.

While details of the overhaul remain secret, Goldman has said it plans to improve shareholder returns by cutting expenses, scrapping legacy technology and simplifying its organization structure.

Goldman is also likely to detail plans to expand its consumer banking business, which suffered a blow late last year amid a series of questions over the fairness of the algorithm linked to its Apple Inc.  (AAPL) - Get Report Titanium credit card and a potential investigation by financial services authorities in the state of New York.