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Goldman Sachs Misses Q4 Earnings Forecast; Investment Banking Fees Surge, Shares Slump

Goldman Sachs followed its larger rival, JPMorgan, in booking solid investment banking fees, but missed Street forecasts for its headline Q4 earnings.

Updated at 9:50 am EST.

Goldman Sachs  (GS) - Get Goldman Sachs Group, Inc. Report posted weaker-than-expected fourth quarter earnings Tuesday as the bank followed its rivals with solid investment banking revenues but noted a slump in its global capital markets division.

Goldman said earnings for the three months ending in December were pegged at $10.81 per share, down 10.5% from the same period last year and well shy of the Street consensus forecast of $11.76 per share. Group revenues, Goldman said, rose 7.7% to $12.64 billion, topping analysts' forecasts of a $12.08 billion total.

Investment banking revenues rose 45% from last year to $3.8 billion, Goldman said, while overall global markets revenues were down 7% at $3.99 billion.

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“2021 was a record year for Goldman Sachs. The firm’s extraordinary performance is a testament to the strength of our client franchise and people," said CEO David Solomon, referring in part to a return on equity rate of 23%, the highest since 2007. 'Moving forward, our leadership team remains committed to growing Goldman Sachs, diversifying our businesses and delivering strong returns for shareholders.”  

Goldman Sachs shares were marked 8.45% lower in early Tuesday trading immediately following the earnings release, the biggest single-day decline since June of 2020, to change hands at $348.80 each.

Last week, JPMorgan Chase  (JPM) - Get JPMorgan Chase & Co. Report posted stronger-than-expected fourth quarter earnings of $10.4 billion, thanks in part to solid gains from investment banking fees and the release of reserves set aside during the peak of the Covid pandemic, but said net interest income, a key measure of profitability, coming in at around $50 billion, down from the 2021 tally of around $52.5 billion and well shy of Street forecasts.

Global merger deals topped $5 trillion for the first time on record this year, an all-time high powered in part by SPAC deals, cheap capital and major corporate restructurings.

Dealogic, which compiles merger and acquisition data, said the value of global deals rose 63% from last year to $5.63 trillion, a fresh all-time high that eclipsed the 2007 record of $4.42 trillion.

Plans unveiled by General Electric  (GE) - Get General Electric Company Report and Johnson & Johnson  (JNJ) - Get Johnson & Johnson Report to split-up their companies played a big role in this year's record total, as did the surge in deals made with so-called special purpose acquisition companies, or SPACs, lead by Singapore-based Grab's $4.5 billion merger earlier this month.