Profits at Goldman Sachs plummeted by 65% in the fourth quarter as a result of a $5bn (£3.55bn, €4.59bn) regulatory pay-out for the bank's mishandling of mortgage bonds. The write-off caused earnings in the last quarter of 2015 to tumble to $765m, from $1.43bn in 2014.
Net revenue fell by 5% to $7.27bn but it was the settlement fine that ramped up costs, leading to a fall in profit. Goldman's share prices are expected to fall more than 2% once the opening bell rings on Wall Street.
Compromising a $2.39bn civil penalty, an $875m cash payment and $1.8bn in relief for home-owners, the fine is the biggest in the history of Goldman Sachs. US regulators accused the bank of playing a role in the credit crunch in 2007 by "recklessly" selling residential mortgage-backed securities sold in the two years before the crash.
"We are pleased that our diversified business mix allowed us to deliver solid results in a year characterised by uneven global economic activity," said Goldman Sachs CEO and chairman Lloyd Blankfein in a release. "Looking ahead, we believe our strong global client franchise leaves us well positioned to generate superior returns over the long term."
Net income applicable to common shareholders fell by 71.8% because of the regulatory payment. However, earnings per share beat market expectations of $3.53, with Goldman reporting $4.68 per share, an increase of 6.8% from 2014.
Trading revenue fell by 9% to $2.88bn, while en increase was much needed. US banks largely reported flat or rising trading sales as 2014's fourth quarter was one of the weakest in recent years.
Revenue in Goldman's debt and equity divisions Investing & Lending plummeted by 15% to $1.3bn. Quarter-on-quarter growth was 93%, a sign that the bank had a painful three months to 30 September 2015.