Goldman profit hit by big legal provision, weak bond trading
By Richa Naidu and Sweta Singh
(Reuters) - Goldman Sachs Group Inc reported its smallest quarterly profit in nearly four years on Thursday as it set aside more than $1 billion to cover potential mortgage settlements, and nervous investors pulled back from bond trading.
The bank set aside $1.45 billion for mortgage-related legal costs and regulatory matters, five times as much as in the second quarter last year.
Goldman is among the banks targeted by a federal-state working group to go after misconduct in the pooling and sale of mortgage securities in the run-up to the financial crisis.
JPMorgan Chase & Co has already agreed to settle for $13 billion, Bank of America Corp for $16.65 billion and Citigroup Inc for $7 billion.
Goldman and arch rival Morgan Stanley, which reports results on Monday, are next in line for potential settlements, according to a person familiar with the matter.
"That's one significant ... legacy item that we look forward to getting behind us," Goldman's chief financial officer, Harvey Schwartz, said on a conference call on Thursday.
The Wall Street bank's shares were down 1.3 percent at $210.16 in afternoon trading, even though the earnings - when excluding the provision - exceeded the average analyst estimate.
As with its competitors, Goldman's trading business - long a strength for the bank - came under pressure as worries about Greece and China made investors reluctant to trade. Continued...