Goldman Sachs Inc. share price down, Q4 net profit falls due to lower trading and investment banking revenue

Goldman Sachs Inc. announced that its fourth-quarter net profit declined by 7.1% due to decreased revenue from its trading and investment banking operations.

Still, the results revealed by the bank were better than what analysts initially had projected. According to the companys statement, net income fell from $2.33 billion, or $4.60 per share, a year ago to $2.17 billion, or $4.38 per share, however topping analysts estimates of $4.32 a share.

The lender also reported a 12% decline in revenue, which fell to $7.69 billion. Still, the numbers were better than forecasts of $7.64 billion.

One of the analysts, who work at Oppenheimer & Co. – Chris Kotowski – shared for Bloomberg before the official announcement of the results: “Trading has been pervasively weak. There’s going to be ongoing pressure on all these businesses until it gets right-sized and makes a decent return.”

Goldman revealed that its revenue generated from its fixed-income, currency and commodity trading operations amounted to $1.16 billion. This marked a 31% decline from the result posted a year ago, excluding accounting adjustments and a one-time gain over the same period in 2013. The result compared to analysts projections ranging between $1.55 and $1.65 billion.

Goldman is not the first US bank, which reports a decline of its profit and revenue. The three biggest banks in the US – JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. – revealed their worst combined quarterly trading revenue in four years. The decline is believed to largely be a result of a 23% decline in fixed-income, currencies and commodities.

Harvey Schwartz, Goldmans CFO, said that losses tied to a loan to the Portuguese Banco Espírito Santo SA had added to the decrease in credit-trading revenue.

Starting this year and looking ahead, the markets got off in a bumpy start, exacerbated by the SNBs move to remove a cap against the euro, which shocked the financial markets. Mr. Schwartz said the Swiss francs wide swings were “immaterial” to Goldman.

Meanwhile, Chief Executive Lloyd Blankfein said in a statement: “Looking ahead, we see evidence of a continued pick up in momentum for the global economy that will improve the opportunity set for 2015.”

Goldman Sachs Inc. closed 0.71% lower on Friday in New York at $177.23 per share, marking a one-year change of +1.18%. The lender is valued at $77.19 billion. According to CNN Money, the 23 analysts offering 12-month price forecasts for Goldman Sachs have a median target of $190.00, with a high estimate of $225.00 and a low estimate of $138.00. The median estimate represents a +7.21% increase from the last price of $177.23.