By Cristian Bustos. Originally published at ValueWalk.
Shares of Goldman Sachs Group Inc (NYSE:GS) dropped after the firm’s profit was below analysts’ estimates. The release of Goldman Sachs’ fourth-quarter earnings report also revealed that its operating expenses soared 23% on higher pay for Wall Street workers.
Q4 2021 hedge fund letters, conferences and more
Goldman Sachs’ Q4 Report
According to CNBC, profit of the investment bank fell short of analysts’ expectations, with earnings per share hitting $10.81, below the $11.76 forecast. Goldman Sachs posted revenue of $12.64 billion against a $12.08 billion estimate.
Further profit for the fourth quarter slipped 13% to $3.94 billion from the same period last year. Analysts had forecast that a slump in trading would dent the quarterly results, as “equities desks posted revenue that was $300 million below the $2.43 billion estimate.”
Upon the release of the quarterly report, shares of Goldman Sachs dropped by 4.2% in premarket trading.
“Still, companywide revenue in the quarter jumped 8% from a year earlier to $12.64 billion, more than $500 million above the consensus estimate, on gains in investment banking and wealth management,” CNBC reports.
Competitors
With regards to the 23% increase in operating expenses, Goldman Sachs —similar to JPMorgan Chase & Co (NYSE:JPM) and Citigroup Inc (NYSE:C)— paid more to workers in the shape of benefits as they beat company goals for the second year in a row.
Analysts surveyed by FactSet had expected operating expenses to hit $6.77 billion, but the 23% jump means the latter soared to $7.27 billion.
“Both trading and investment banking operations have thrived during the coronavirus pandemic, thanks to a booming period in capital markets that suited Goldman’s Wall Street-centric business model.”
Octavio Marenzi, CEO of bank consultancy Opimas, told CNBC via email: “Goldman Sachs’ disappointing Q4 earnings are a stark reminder that wage inflation is hitting the banking sector hard… It is clear that employees are able to demand significantly higher pay.”
Barclays PLC (LON:BARC)’s analyst Jason Goldberg had said in a note last week that Goldman’s CEO David Solomon could set new goals given the bank’s stellar performance, by adding: “Given it is tracking ahead of most of its medium term-targets, we wouldn’t be surprised if Goldman updates these targets on its 1Q22 earnings call or hints at an update later in the quarter.”
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