Friday 19 January 2018

Cost cutting round at Goldman Sachs as earnings fall

Lauren Tara LaCapra

GOLDMAN Sachs said quarterly earnings fell 12pc as it lost money on an investment in a Chinese bank and other equities, spurring the bank to launch a new round of cost-cutting.

Investment banking revenue also dropped as equity underwriting and merger advisory activity slowed.

The results show the pressure investment banks face as trading volume drops globally and merger activity slows. Goldman cut 100 jobs during the second quarter and trimmed other costs, including compensation and professional fees.

Its investing and lending division suffered $194m (€158m) of losses on its investment in shares of Industrial and Commercial Bank of China Ltd (ICBC), and $112m of losses from other stocks.

Goldman's earnings per share still easily beat analyst expectations, in part because it spent $1.5bn buying back 14.3 million of its shares during the quarter.

The bank earned $927m, or $1.78 per share, down 12pc from $1.052bn, or $1.85 per share, a year earlier. Analysts' average forecast was $1.16 per share, according to Thomson Reuters I/B/E/S.

Goldman shares were up 2pc in premarket trading at $99.65.

"I think a lot of the cost-cutting measures are starting to pay off to the bottom line," said Edward Deicke, a registered representative at JHS Capital Advisors.

Goldman's operating expenses fell 8pc to $5.2bn. But revenue fell a sharper 9pc to $6.6bn.

Overall, its lending and investing division reported an 81pc decline in net revenue, to $203m from more than $1bn a year earlier.


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