Goldman Sachs Results: 5 Things to Watch

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 [e-mail]

(END) Dow Jones Newswires

January 16, 2018 12:14 ET (17:14 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.