Goldman Sachs profit down 56%

Goldman Sachs Group fourth-quarter profit fell 56 per cent as trading and investment banking revenue plunged, but the bank managed to beat analysts' expectations through cost cutting and lower taxes.

Goldman's results reflected the weakest year for Wall Street since the financial crisis. As politicians and policymakers battled over ways to handle Europe's sovereign debt burden, market volatility surged and Wall Street's clients pulled back on risk-taking, held off on acquisitions and delayed stock and bond offerings.

The company's payroll declined by 2,400 employees during the year, reflecting job cuts across trading, banking and back-office operations. The bank slashed compensation 21 per cent to $12.2 billion, or $367,057 per employee, from $15.4 billion, or $430,700 per employee, in 2010.

Goldman earned $978 million, or $1.84 per share, during the last three months of 2011, down from $2.2 billion, or $3.79 per share, a year earlier.

The organisation's profit for the full year was $2.5 billion, its weakest year since 2008, at the height of the financial crisis.

Each of Goldman's business lines - investment banking, trading, investment management and investing and lending - reported double-digit revenue declines during the fourth quarter. All but investment management reported lower revenue for the full year.

Goldman's return-on-equity, a key measure of profitability, was just 3.7 per cent for 2011. In the years leading up to the financial crisis, it boasted returns of more than 30 per cent.

Wall Street rivals including Jefferies, JPMorgan Chase and Citigroup have reported similar weakness in capital markets revenue, and also responded with job and pay cuts.

While Goldman's fourth-quarter revenue dropped 30 per cent to $6 billion, the bank took steps to reduce expenses and reported lower taxes than in the year-earlier period.

Operating expenses declined 7 per cent to $4.8 billion, while the bank's tax provision of $234 million was down 78 per cent.

Reuters