STREAMING NOW: Watch Now

Goldman Sachs is Wall Street's big loser

Goldman Sachs can't catch a break.The vaunted Wall Street firm reported a nearly $2 billion quarterly loss Wed...

Posted: Jan 17, 2018 6:12 PM
Updated: Jan 17, 2018 6:12 PM

Goldman Sachs can't catch a break.

The vaunted Wall Street firm reported a nearly $2 billion quarterly loss Wednesday -- its first loss in six years -- due to a short-term hit from the new tax law.

The lack of market volatility also led to a steep drop in trading revenue during the last three months of 2017.

This weakness is even hitting Goldman Sachs employees. The firm's compensation and benefits expenses -- its so-called bonus pool -- rose just 2% last year. But the company's headcount rose 6%.

When you do the math, workers actually got 4% less than they did in 2016. Granted, Goldman Sachs employees still received $323,852 on average last year. So no need for tears.

Still, Goldman Sachs workers took home $338,576 in 2016. And the average compensation for a Goldman Sachs employee in 2015 was $344,511.

Shares of Goldman Sachs fell 3% Wednesday -- even though earnings beat forecasts after backing out the tax charges. Overall revenues topped forecasts too.

The stock has gained less than 10% in the past year too, underperforming the S&P 500 even as the broader market keeps powering on to new record highs.

Goldman Sachs has lagged all of its top rivals too -- JPMorgan Chase, Citigroup, Morgan Stanley, Bank of America and even troubled Wells Fargo.

CEO Lloyd Blankfein alluded to the headwinds facing the firm, saying in the company's earnings release that last year was "a challenging environment " for its trading business.

Goldman Sachs and other investment banks make more money when the markets are more volatile. It leads clients to trade more actively.

But the company said Wednesday revenue from stock trading fell 14% from a year ago in the fourth quarter while revenuesfor bond, currency and commodity trading plunged 40% from the fourth quarter of 2016.

Blankfein was more upbeat about the future though, saying that he expects a better year "with the global economy poised to accelerate" and that the new tax laws in the United States will give the company a longer-term boost too.

Goldman Sachs said that it took a $4.4 billion charge in the fourth quarter because of the tax law changes.

Most ($3.3 billion) was due to the cost tied to bringing cash in foreign subsidiaries back to the United States. The remaining $1.1 billion was a result of revaluing so-called deferred tax assets -- previous tax deductions that are worth less following the corporate tax cut.

Other big banks have been hurt by the tax changes too. JPMorgan Chase took a $2.4 billion hit when it reported its latest results last week while Citigroup said Tuesday that it took a whopping $22 billion one-time charge.

Related: Why Goldman Sachs gave early stock awards to 300 employees

Most banks should benefit from the lower corporate tax rate going forward though -- and Goldman Sachs is no exception. Investors are hopeful that companies will buy back more stock and increase dividends as a way to reward shareholders.

But Chief Financial Officer Martin Chavez said during the company's conference call with analysts that the firm expected to buy back just $5 billion to $6 billion in stock for the next few years. That's lower than what Wall Street was expecting.

The fact that Goldman Sachs has largely missed out on the big market rally is also something that has vexed investors. President Trump has largely been pro-business, championing for fewer regulations as well as lower taxes.

And Trump has stacked his administration with Goldman alums, most notably Treasury Secretary Steven Mnuchin and National Economic Council director Gary Cohn.

Related: Blankfein says U.K should vote again on Brexit

But Blankfein does not appear to be a big fan of the president. While never mentioning Trump by name, Blankfein has made pointed critiques of Trump policies on Twitter since Trump was elected.

His two most recent ones are no exception. Without mentioning Trump by name, Blankfein tweeted on January 11 that he was optimistic that there could be a compromise on immigration reform.

"Hearing bipartisan support forming on #DACA. The country and the kids need it, deserve it. Hope it's not just a dream..." he tweeted.

One day later, Blankfein tweeted a photo of the Statue of Liberty from Goldman Sachs headquarters, writing that the foggy "view from our building today reminds me that despite all the sh*t, American values will shine through."

Terre Haute
Broken Clouds
79° wxIcon
Hi: 88° Lo: 64°
Feels Like: 83°
Robinson
Clear
76° wxIcon
Hi: 87° Lo: 62°
Feels Like: 76°
Indianapolis
Scattered Clouds
75° wxIcon
Hi: 85° Lo: 67°
Feels Like: 75°
Rockville
Clear
71° wxIcon
Hi: 87° Lo: 64°
Feels Like: 71°
Casey
Few Clouds
74° wxIcon
Hi: 87° Lo: 64°
Feels Like: 74°
Brazil
Broken Clouds
79° wxIcon
Hi: 87° Lo: 64°
Feels Like: 83°
Marshall
Broken Clouds
79° wxIcon
Hi: 88° Lo: 64°
Feels Like: 83°
Storms Possible
WTHI Planner
WTHI Temps
WTHI Radar

WTHI Events

 

Illinois Coronavirus Cases

(Widget updates once daily at 7 p.m. CT)

Confirmed Cases: 150554

Reported Deaths: 7309
CountyConfirmedDeaths
Cook934964664
Lake10104427
DuPage9454480
Kane7949280
Will7061322
Winnebago3131101
McHenry2179100
St. Clair2089143
Kankakee133565
Unassigned1170210
Rock Island109430
Madison107770
Kendall101122
Champaign99217
Boone62321
DeKalb59520
Peoria58329
Sangamon47333
Jackson34319
McLean29214
Randolph2917
Stephenson2806
Ogle2794
Clinton24417
Macon24122
LaSalle23717
Whiteside19915
Union19519
Grundy1855
Coles18417
Iroquois1685
Tazewell1588
Knox1490
Warren1470
Monroe14113
Adams1391
Cass1367
Williamson1344
Morgan1323
Jefferson11117
Lee1042
McDonough10415
Henry1031
Vermilion822
Pulaski790
Marion730
Macoupin613
Montgomery591
Perry591
Douglas540
Livingston532
Jo Daviess491
Christian474
Jasper477
Ford411
Woodford392
Jersey371
Franklin360
Bureau312
Menard260
Mercer250
Washington250
Cumberland240
Fayette243
Mason230
Wabash230
Alexander220
Carroll212
Johnson210
Piatt200
Effingham191
Hancock191
Moultrie190
Shelby191
Clark180
Crawford180
Logan180
Bond171
De Witt160
Edgar160
Fulton160
Massac150
Wayne151
Schuyler130
Marshall120
Brown100
Saline100
White90
Greene80
Henderson80
Lawrence80
Richland70
Hamilton60
Stark60
Pike50
Gallatin40
Clay20
Edwards20
Calhoun10
Hardin10
Out of IL10
Pope10
Putnam10
Scott10

Indiana Coronavirus Cases

(Widget updates once daily at 8 p.m. ET)

Confirmed Cases: 49063

Reported Deaths: 2732
CountyConfirmedDeaths
Marion11760689
Lake5276246
Elkhart340255
Allen2835133
St. Joseph200169
Cass16429
Hamilton1608101
Hendricks1425100
Johnson1296118
Porter76738
Tippecanoe7359
Clark66844
Madison66764
Bartholomew59145
Vanderburgh5876
LaPorte58326
Howard58058
Kosciusko5624
Marshall5016
Noble48528
LaGrange4779
Jackson4733
Boone45443
Delaware45252
Hancock45236
Shelby43125
Floyd38444
Morgan32731
Monroe30928
Montgomery29720
Grant29626
Clinton2902
Dubois2886
Henry28216
White26610
Decatur25432
Lawrence24825
Dearborn23823
Vigo2388
Warrick22729
Harrison21622
Greene19032
Miami1862
Jennings17712
Putnam1708
DeKalb1634
Scott1628
Daviess14817
Wayne1436
Orange13623
Perry1359
Steuben1302
Franklin1268
Ripley1247
Jasper1232
Wabash1142
Carroll1102
Fayette1037
Newton9910
Gibson982
Whitley975
Starke943
Randolph804
Huntington782
Jefferson762
Wells751
Fulton721
Jay680
Washington671
Pulaski661
Knox640
Clay604
Rush583
Owen501
Adams491
Benton480
Posey450
Sullivan451
Spencer441
Brown421
Blackford392
Crawford320
Fountain322
Tipton311
Switzerland280
Parke240
Martin220
Ohio180
Vermillion140
Warren141
Union130
Pike110
Unassigned0193