Goldman Sachs released worse-than-expected earnings figures for Q4 as the big US banks completed their earnings season.
Goldman suffered from reduced deals in investment banking as CEOs moved to a defensive tone over the last year.
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Goldman stock slipped to $353; the $340 level is vital for support, with the $380 marking upside resistance.
Goldman said earnings for the three months to the end of December were $1.33 billion, or $3.32 per share, down from $10.81 over the same period last year and well short of the Wall Street forecast of $5.48 per share. Group revenues at the bank increased over 16% to $10.59 billion and also missed analysts’ estimates of $10.83 billion.
Investment banking revenues were 48% lower from last year to $7.36 billion. However, that was partially offset by $32.5 billion in net revenues from the global banking and markets division. Merger activity was a significant drag on earnings, down around 40% last year from record 2021 levels, with a 56% drop for the fourth quarter.
Goldman put aside $972 million to cover potential losses from its credit and loan divisions, three times the size of the previous year, as interest rates pressure credit payments.
“Against a challenging economic backdrop, we delivered double-digit returns for our shareholders in 2022,” said CEO David Solomon. “Our clear, near-term focus is realising the benefits of our strategic realignment which will strengthen our core businesses, scale our growth platforms and improve efficiency. The foundation of all of our strategic efforts is our client franchise, which is second to none.”
Headcount was also cut further as the bank sought to save money. Solomon told employees in December that a “variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity,” were hurting the bank, and a “headcount reduction will take place in the first half of January.”
Solomon told analysts on an earnings call: “We tried to do too much too quickly. I think we probably, in some places, haven’t had all the talent that we’ve needed to execute the way we’ve wanted. We’re making adjustments on that.”
Shares in Goldman dropped over 6% but jumped over 7% at the rival bank.
