Goldman Sachs stock sinks to 4½-month low after rare earnings miss

Goldman Sachs posts big miss on top and bottom line

Goldman Sachs stock fell to its lowest level in nearly five months Tuesday after the premiere Wall Street firm reported first-quarter earnings that missed on the top and bottom lines.

Here are some highlights of the earnings:

  • EPS of $5.15 a share vs. $5.31 a share expected by Thomson Reuters analysts' consensus.
  • Revenue of $8.026 billion vs. $8.446 billion expected by Thomson Reuters analysts' consensus.
  • Net revenues from bond, currency and commodities trading was little changed from the same period last year at $1.69 billion.
  • Equities trading revenue fell 6 percent year over year.

Heading into Tuesday's report, Goldman had topped Wall Street's earnings estimates 90 percent of the time when reporting quarterly results over its history as a public company, according to Bespoke Investment Group. The last time Goldman reported a miss on earnings per share was the fourth quarter of 2015.

Shares skidded 4.5 percent in the first hour of trading, falling to $216.02 at one point before regaining some lost ground. It was the lowest intraday price since it traded at 214.97 on Nov. 30. In anticipation of the earnings announcement Tuesday, the share price had gained more than 1 percent.

"The operating environment was mixed, with client activity challenged in certain market-making businesses and a more attractive backdrop for underwriting in our investment banking franchise," Chairman and CEO Lloyd C. Blankfein said in a release.

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Goldman said "significantly" lower net revenues from commodities and currencies offset "significantly" higher net revenues in mortgage products. Stock trading revenue was hit by declines in commissions and fees, reflecting lower volumes in the U.S.

A jump in trading revenue boosted major bank earnings in the last few quarters and continued to help the earnings of Citigroup and JPMorgan Chase in the first quarter. Bank of America also reported earnings Tuesday, beating or meeting Wall Street expectations on almost every single metric.


"What we have is a contrast between Goldman being a broker-dealer that's kind of moved into being categorized as a bank, and Bank of America which is a traditional commercial bank which gets a lot more benefit from higher interest rates, especially on the short end of the curve," Marty Mosby, director of bank and equity strategies at Vining Sparks, said on CNBC's "Squawk Box."

Earlier this year, the U.S. 2-year Treasury yield hit fresh highs going back to the financial crisis, just ahead of the Federal Reserve's interest rate hike in March, the second in three months. Treasury yields have since fallen to lows not seen in at least a month as concerns about economic growth and supportive fiscal policy have increased.

Goldman said its net interest income fell 42 percent year on year. Bank of America said its net interest income rose 5 percent from the same quarter last year.

Goldman Sachs also announced the repurchase of an addition 50 million shares of common stock and raised its quarterly dividend to 75 cents from 65 cents per common share. The dividend will be paid on June 29 to common shareholders as of June 1.

Extended-hours performance of Goldman shares

Source: FactSet

Goldman said the Standardized Common Equity Tier 1 ratio — a measure of financial strength watched by regulators— fell to 14.2 percent in the first quarter, down from 14.5 percent in the fourth quarter of 2016.

For the first quarter of 2016, the financial giant reported diluted earnings per share of $2.68 on revenue of $6.34 billion.

The financial stocks have led the U.S. stock market rally since the presidential election, but have struggled more recently.

Goldman shares hit an all-time high in the first quarter and are up more than 30 percent since the election but were lower by a little more than 5 percent for the year, as of Monday's close.

— CNBC's Juan Aruego contributed to this report.

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