Goldman Sachs Results: 5 Things to Watch
January 16 2018 - 12:29PM
Dow Jones News
By Liz Hoffman
Goldman Sachs Group Inc., a Wall Street powerhouse, is expected
to report its fourth-quarter results before the market opens
Wednesday. Here's what you need to know.
1. Lower Revenue and Profits
Analysts are projecting operating profits of $2.04 billion on
revenue of $7.65 billion. Both are down about 5% from last year's
fourth quarter, a strong one across Wall Street.
2. Tax Hit
That is before accounting for an expected $5 billion one-time
tax-related charge, which will push Goldman into its first
quarterly loss since 2011. It will also wipe out much of the firm's
expected annual profits of $7.86 billion. Goldman is taking the hit
on paper now, though it has several years to pay the tax bill,
which is mostly related to foreign profits that were kept out of
the IRS's reach.
3. Fixing FICC
Pressure is mounting for Goldman to fix its ailing fixed-income
trading division. Once a profit machine, this business has
struggled lately, particularly in currencies and commodities, and
traders say the fourth quarter was another tough one. Goldman CFO
Martin Chavez, who faced tough questions earlier in the year on the
unit's underperformance, will likely be pressed to better explain a
turnaround plan that includes sweetening client service and
embracing lower-margin trades.
4. Bad Loan
JPMorgan Chase & Co. on Friday took a $273 million loss on a
margin loan tied to South African retailer Steinhoff International
Holdings NV, whose share price has collapsed amid an accounting
scandal. Goldman was among a bank group that lent more than 1
billion euros to Steinhoff's chairman against his stake in the
company, and sold much of the underlying stock at a loss late last
year. JPMorgan reported a $143 million loss in its stock-trading
unit, an area where Goldman -- in the midst of a somewhat rocky
push to improve it high-speed trading services -- can ill-afford a
mistake. JPMorgan also reported a $130 million credit loss related
to its loan.
5. M&A Payday
Goldman turned heads with nearly $1 billion in merger-advisory
revenue in the third quarter. Another strong showing will cement
its lead over No. 2 Morgan Stanley, which has been narrowing the
gap over the past few years. Goldman had sole billing on one of the
fourth quarter's biggest prizes: C.R. Bard's $24 billion sale to
Becton, Dickinson & Co., which carried a $51 million fee for
Goldman.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
January 16, 2018 12:14 ET (17:14 GMT)
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