Goldman Sachs fourth quarter earnings hit by settlement provisions

Fourth quarter earnings from Goldman Sachs fell short of expectations due to money set aside to pay a regulatory settlement for mortgage-backed securities it sold in the lead-up to the financial crisis.

Diluted earnings per share for the quarter fell to $1.27, 70% down year on year and down from the $2.90 in a disappointing third quarter, well short of consensus forecasts of $3.56.

Net revenues for the fourth quarter were $7.27bn, beating market expectations of $7.14bn but short of the $7.69bn in the same period last year.

This meant net revenues for the calendar year of $33.82bn and diluted earnings of $12.14 per share, compared with $17.07 for the prior year.

Fourth quarter earnings were dented by Goldman's provisions, announced last week, for the settlement with the US Justice Department and other law-enforcement agencies for residential mortgage-backed securities it sold between 2005 and 2007.

During the quarter these provisions amounted to $1.80bn, or $1.54bn after tax, which reduced diluted earnings per common share by $3.41.

If you add this back in, the Wall Street bank actually beat forecasts by some distance.

The giant investment bank completed a year with the top global rank for merger and acquisition and equity offerings, and recording its highest net advisory revenues since 2007.

Investment banking revenues rose 9% year-on-year to $7.03bn, helped by strong M&A activity in the US helping lift financial advisory turnover 40% to $3.47bn.

But sales from the fixed income, currency and commodities trading arm saw dipped 13% to $7.32bn, due to significantly lower revenues in mortgages, credit products and commodities trading.

“We are pleased that our diversified business mix allowed us to deliver solid results in a year characterized by uneven global economic activity,” said Lloyd Blankfein, chairman and chief executive officer, who in September revealed he was undergoing chemotherapy for lymphoma.

“Looking ahead," he added, "we believe our strong global client franchise leaves us well positioned to generate superior returns over the long term.”