Investment banking firm Goldman Sachs is the latest financial firm to have its profits take a turn for the worse, following plummeting incomes reported from JPMorgan Chase, Citigroup, Bank of America, Wells Fargo, and PNC.
According to Goldman Sachs' 2016 first quarter earnings statement released Tuesday, net income at the firm fell 60 percent year-over-year due to operational troubles in all areas of the business.
Goldman Sachs reported net earnings of $1.14 billion for the first quarter ended March 31, 2016, up 48 percent from $765 million in the fourth quarter of 2015 but down 60 percent from a year ago when earnings totaled $2.84 billion.
Net revenues at the investment firm fell 13 percent from the fourth quarter of 2015 to $6.34 billion for the first quarter of 2016 and decreased 40 percent from $10.62 billion last year.
Lloyd C. Blankfein, Chairman and CEO at Goldman Sachs noted, "The operating environment this quarter presented a broad range of challenges, resulting in headwinds across virtually every one of our businesses."
Diluted earnings per common share were $2.68 compared with $5.94 for the first quarter of 2015 and $1.27 for the fourth quarter of 2015, the statement showed.
Investment banking net revenues were $1.46 billion for the first quarter of 2016, 23 percent lower than the first quarter of 2015 and 5 percent lower than the fourth quarter of 2015. Meanwhile, underwriting net revenues fell 27 percent year-over-year to $692 million, due to "significantly lower net revenues in equity underwriting, reflecting low levels of industry-wide activity during the quarter," the statement said.
"The operating environment this quarter presented a broad range of challenges, resulting in headwinds across virtually every one of our businesses."
Lloyd Blankfein, Goldman Sachs Chairman and CEO
On the other hand, Goldman Sachs said that debt underwriting net revenues were significantly higher compared with the first quarter of 2015, "primarily reflecting an increase in investment-grade activity." Overall, the firm’s investment banking transaction backlog decreased compared with the end of 2015, but was higher compared with the end of the first quarter of 2015.
Investing and lending net revenues fell 93 percent from the last quarter and 95 percent year-over-year to $87 million for the first quarter of 2016. Goldman Sachs attributes this decrease to a "significant decrease in net revenues from investments in both private and public equities, which were negatively impacted by generally lower global equity prices and corporate performance during the first quarter of 2016."
Debt securities and loans net revenues were also significantly lower compared with the first quarter of 2015, primarily "reflecting lower net revenues related to loans and lending commitments to institutional clients (including higher provision for losses) and lower net gains from investments," the statement said.
“Looking ahead, we will continue to focus on delivering superior service to our clients and managing our business efficiently, which remain essential to generating shareholder value over the long term," Blankfein said.
Click here to view Goldman Sachs' 2016 First Quarter Earnings Statement.