Goldman Sachs' earnings fell 53 percent in the fourth quarter due to sharp declines in its bond trading and investment banking businesses.
Goldman Sachs Group Inc. earned $2.23 billion after paying preferred dividends in the last three months of the year, down from $4.79 billion in the same period year earlier. On a per-share basis, the earnings came out to $3.79 per share versus $8.20 per share.
Analysts surveyed by FactSet expected the bank to earn $3.76 per share. Revenue fell 10 percent to $8.64 billion. Goldman fell 2.4 percent to $170.48, leading other financial stocks lower.
The bank's chief financial officer, David Viniar, attributed the poor performance to "heightened uncertainty surrounding the global economic outlook." In a conference call with analysts to discuss earnings, Viniar said the uncertainty led to a steady decline in investment banking activity during the year.
Goldman reported drops in all its key businesses. In the fourth quarter, its revenues from financial advisory services fell 7 percent from last year as mergers and acquisitions declined. Goldman also led fewer debt and stock underwriting deals, leading to a 12 percent drop in revenue in that business.
In a troubling sign, the bank said its backlog of investment banking transactions decreased. That suggests revenues from advising companies on deals might not pick up in the first quarter of 2011.
Goldman's trading business, typically its strongest, also fared poorly. Trading revenues from bonds, currencies and commodities fell 48 percent. The company cited "generally low client activity levels" for the decline. Bond markets fell broadly in the fourth quarter on concerns about Europe's debt troubles. Revenues from stock trading fell 5 percent.
Goldman Sachs paid its employees $15.38 billion in salaries and bonuses, or 39.3 percent of its annual revenue, for 2010. The amount was 5 percent lower than 2009.
One of the only areas Goldman performed well in was investing and trading for its own accounts.
In the fourth quarter, its investing and lending segment recorded net revenue of $2 billion, compared with $1.4 billion last year. That included gains of $1.07 from trading stocks and another $537 million from debt.
Goldman had promised to release the portion of revenue produced from trading its own funds as part of an effort to become more transparent. For years, investment banks and others have made huge profits from making their own bets in the stock and bond markets, which is known as proprietary trading in the financial industry.
That kind of trading came under attack from economists, who say the trades played a role in the financial crisis by allowing banks to take on more risk than the system can bear.
However, Goldman might not be able to rely on gains from this segment in the future. CFO Viniar said he's unsure which parts of the business will be permitted in new rules and regulations that are still being ironed out.
For the year, the bank's income fell 37 percent to $7.71 billion, while its revenue declined 13 percent to $39.16 billion. Earnings per share fell to $13.18 from $22.13.