Profit shrinks at Goldman but jumps at Citi. The differentiating factor: legal costs. Fred Katayama reports.
A tale of two banks where legal expenses made the difference in results. Goldman Sachs' quarterly profit plummeted to $916 million, its smallest in nearly four years, and that widely missed analysts estimates. The culprit: $1.5 billion set aside for mortgage litigation expenses. Back in February, Goldman warned that it could face a federal lawsuit over its sales of residential mortgage-backed securities. Goldman's revenue also fell. The investment bank saw a sharp drop in trading revenue from bonds, currencies and commodities. It also made less off its own investments in equities. On the other hand, the surge in M&A activity industry-wide expanded its take in investment banking. Goldman's shares down in early trading. The stock has gained nearly 10 percent gain this year. An opposite story at Citigroup. Profit jumped to its highest level in eight years because it slashed its legal expenses. Last year, Citi paid $7 billion to settle a probe over claims it misled investors about mortgage-backed securities it sold. Profit and revenue beat expectations. Citi's shares adding on to their 4 percent gain this year.