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Goldman’s big bonus payouts weigh on quarterly profit Dealmaking booms but drop-off at trading arm

Goldman shares fell in pre-market trading after the results © REUTERS

Goldman Sachs’s net profit fell 13 per cent year-on-year in the last three months of 2021, as the Wall Street bank paid out bigger bonuses than analysts had forecast.

In fourth-quarter earnings on Tuesday, Goldman reported net income of $3.8bn, or $10.81 per share, compared with $4.36bn, or $12.08 per share, in the same period last year.

This was a bigger drop than analysts had predicted, with the average forecast for net income of around $4.1bn, according to consensus data compiled by Bloomberg.

Concerns around operating costs following JPMorgan’s earnings on Friday had weighed on bank stocks.

Goldman reported operating expenses of $7.3bn for the fourth quarter, up 23 per cent from a year earlier and more than the $6.4bn analysts had expected.

Pay costs including bonuses were up 31 per cent year on year in the fourth quarter at $3.2bn, more than the $2.9bn analysts had forecast. Overall, salary expenses were up 33 per cent at $17.7bn in 2021, mirroring the bank’s revenue growth for the year.

Full-year net profit for 2021 came in at $21.2bn, more than double what it was in 2020 and easily the bank’s biggest year. Goldman shares were down more than 4 per cent in pre-market trading in New York.

The results underscored that Goldman’s profit engine remains trading and investment banking two years after David Solomon, Goldman’s chief executive, outlined plans to focus on newer businesses like consumer and transaction banking.

Revenue earned in investment banking from advising on mergers and acquisitions, in