The investment giant has suffered its third consecutive quarter of dwindling profits after its total legal spend shot up dramatically from $161m in Q4 2014 to $1.95bn in Q4 2015. The spike contributes to a more than four-fold boom in Goldman Sachs' full-year legal bill, recorded at $754m in 2014, but now up to a staggering $4.01bn for the 2015 financial year. Last month, the bank reached a tentative $5.1bn settlement with US authorities following an investigation into its handling of mortgage backed securities. In principle, the agreement pulled back fourth quarter earnings by $1.5bn (or $3.41 per share) on an after-tax basis, and is largely responsible for the explosion in the bank's legal spend figures. The turmoil has ammounted to a 70 per cent slump in Goldman Sachs' profits for the fourth quarter year-on-year to $574m.
Legal cost cutting
Despite the boom in Goldman Sachs' legal expenditure, Reuters calculations do show that the bank managed to cull its non-compensation costs by 7.2 per cent when excluding its litigation and regulatory bills. Legal cost cutting was a theme across many of the other major US banks, as many of Goldman Sachs' competitors are now in recovery after taking their own settlement hits from US regulators in the previous financial year. Bank of America has reported its best annual profit in nearly 10 years after full-year litigation expenses fell from $16.4bn in 2014 to $1.1bn last year. In 2014, the bank settled a similar mortgage-backed securities probe with US regulators for $17bn. Meanwhile, Morgan Stanley has cut its legal bill from $5.1bn to $3.7bn year-on-year, as it too settled its own mortgage-backed securities investigation for $3.1bn in fiscal 2014. The good news continued at Citigroup and JPMorgan Chase, which both benefited from shrunken legal costs. Citigroup's fourth quarter legal spend was down from $2.9bn to $411m, while the quarterly legal bill at JPMorgan Chase fell from $1.1bn to $644m. Sources: Legal Business; New York Post; BBC
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