Credit: Goldman Sachs ( GS ) said Wednesday it's evaluating whether to enter the cryptocurrency frenzy after fourth-quarter results beat forecasts despite continued weakness in its trading operations, which underperformed vs. other big banks.
[ibd-display-video id=3088398 width=50 float=left autostart=true] Last month, when Bitcoin was double what it is today, Bloomberg reported that Goldman was setting up a trading desk to make markets in digital currencies.
On Wednesday, CFO Martin Chavez did not say whether a trading operation was in the cards, but he warned is approaching the volatile market with "extreme prudence and caution."
"There's just a huge number of topics to address," he told analysts. "And being a part of the industry, we're working on all of that. Custody is a part of it, and it's a very complex one, so it's really too early to say how that will evolve for the industry or for ourselves."
At Bank of America ( BAC ), which also reported Wednesday, CEO Brian Moynihan told analysts that customers are welcome to buy cryptocurrencies but not through the bank's Merrill Lynch unit, adding "it's just our view that customers should be careful here."
The caution follows warnings from the Treasury Department, which has said it is following cryptocurrencies closely due to their use in criminal activity, while Secretary Stephen Mnuchin said last week Bitcoin could become the next "Swiss Bank account."
Meanwhile, Goldman's Q4 adjusted EPS unexpectedly rose, climbing 11.8% to $5.68, beating views for a dip to $4.90. Revenue fell 4% to $7.83 billion, topping estimates for $7.63 billion.
But fixed income, currency and commodities trading revenue sank 50% to $1 billion, and equities revenue fell 14% to $1.37 billion. Investment banking revenue jumped 44% to $2.14 billion, investing and lending revenue climbed 12% to $1.66 billion, and investment management revenue rose 4% to $1.66 billion.
The drop in FICC revenue was steeper than at other big banks in Q4. JPMorgan Chase's ( JPM ) tumbled 34% to $2.22 billion , and Citigroup's ( C ) sank 18% to $2.4 billion. Bank of America's dropped 13%.
BofA's EPS rose 17.5% to 47 cents, beating by 3 cents, as revenue grew 2.2% to $20.44 billion, missing views for $21.28 billion. Consumer banking revenue grew 10% to $9 billion, wealth management climbed 7% to $4.7 billion, global banking grew 10% to $5 billion, while sales and trading revenue sank 9% to $2.5 billion.
Goldman shares lost 1.9% to 253.65 on the stock market today , still in buy range and finding support at the 50-day line But the stock's relative strength line hit a four-month low. The RS line, which tracks a stock's performance vs. the S&P 500 index, has been flat to lagging for the past year.
Rival investment bank Morgan Stanley ( MS ), which reports fourth-quarter earnings on Thursday, gained 1.4%. BofA eased 0.2%, still well extended from any possible buy point.
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Wall Street has looked at what the banks expect to gain from the GOP's tax reform package. Bank of America, among the most U.S.-exposed big banks, could be among the bigger gainers from the legislation.
Goldman's Chavez said the company expected an effective tax rate of 24% due to the tax reform, adding that there was greater potential for heightened M&A, more financing and stronger economic growth.
The law, he said, had brought "significant clarity" to corporations, resulting in more dialog with clients in investment banking.
Last week, JPMorgan CFO Marianne Lake said the company would deepen its investments in such areas as digital capabilities, offices and bankers. The company also said it expected tax reform to boost profits at small businesses and spending in the commercial space.
CEO Jamie Dimon said that much of the benefit from tax reform would "fall to our bottom line in 2018 and beyond."
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
