Goldman Sachs Group cut its maximum range of potential legal expenses to $2 billion from its estimates of $5.3 billion in November 2015. The company agreed to settle penalties and payments totaling roughly $5.06 billion over allegations of its role in selling mortgage bonds before the financial crisis in 2008.
Goldman Sachs has been under federal and state investigation regarding its involvement in selling mortgage bonds that may have led to the financial crisis, The Wall Street Journal reported. In January, the firm agreed to pay $2.39 billion for civil monetary penalty, cash payment of $875 million, and provide consumer relief worth $1.8 billion. Accounting for these fines, the firm slashed its reasonable possible losses due to litigation issues to $2 billion, according to a regulatory filing on Feb. 22.
Goldman Sachs also revised the list of probes the firm was included. It added investigations from regulators regarding the firm's compensation practices, which was not it the November filing, the paper noted.
Furthermore, the company revealed that its traders incurred losses on 40 days in 2015, 15 of which were recorded in the fourth quarter during the financial year. Its trading revenue reached more than $100 million on 34 days during the financial year, per Goldman Sach's filing.
Goldman Sachs reported a 64% increase in noncompensation issues during the fourth quarter,according to Reuters. A huge chunk was due to the $1.95 billion allotted for litigation and regulatory issues.
"The uncertain regulatory enforcement environment makes it difficult to estimate probable losses, which can lead to substantial disparities between legal reserves and subsequent actual settlements or penalties," the bank stated in a filing.
Meanwhile, Richard Ramsden, a Goldman Sachs bank analyst, said that Wall Street banks could report a 15% year-over-year decline in returns for the first quarter, in terms of revenues from capital markets as cited by Business Insider. He said that higher volatility, wider credit spreads, lower equity valuations, and uncertainty around the trajectory of economic growth are the main factors for the slower growth.
Goldman Sach's shares increased 1.7% at $149.48 in early trading on Feb. 22 report. At the closing of Feb. 19, the bank's stock lost 18% of its value since Jan. 1.
