Goldman Sachs Earnings Plummet on $5 Billion Settlement

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By Jacob Maslow

Goldman Sachs shares plunged on Wednesday, following the release of underwhelming quarterly earnings reports.

The largest investment bank on Wall Street said its 4th quarter earnings dropped by 65% to $765 million, or $1.27 a share, which is down significantly from $2.17 billion, or $4.38 a share, a year earlier.

The steep decline is attributed to the firm’s agreement to pay $5.1 billion in settlement, the largest regulatory penalty in the company’s history. The bank was earlier investigated by U.S. authorities over its handling of mortgage-backed securities.

U.S. regulators have previously penalized three of the biggest U.S. banks, JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc. for selling faulty mortgage-backed securities before the financial crisis. Collectively, the aforementioned firms paid $37 billion in penalties.

Goldman Sachs’ 4th quarter revenue reached $7.27 billion, which is a tad higher over earlier estimates of $7.09 billion. The firm’s shares dropped 2% in premarket trade and are down 13% so far this year through Tuesday’s closing price.

Looking at the big picture, Q4 net revenues for 2015 in investment banking topped at $1.55 billion, 7.0% higher from the year before.

Meanwhile, U.S. stock futures opened low on Wednesday with the Dow futures sinking 1.8%, or 288 points. S&P 500 futures dropped 1.82%, or 34 points, while the NASDAQ 100 futures declined 2.04%, or 84 points.

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