Goldman Sachs Group Inc. posted a 53-per-cent decline in quarterly profit, reflecting the difficulty Wall Street had in generating trading revenue in a volatile interest-rate environment.
The bank, arguably Wall Street's most powerful, also said it will pay less to its employees than a year earlier, although the decline was smaller than the drop in revenue.
Goldman shares fell 3.1 per cent to $169.22 in premarket trading.
Fourth-quarter profit after payment of preferred stock dividends totalled $2.23-billion, or $3.79 per share, compared with $4.79-billion, or $8.20, a year earlier. Net revenue fell 10 per cent to $8.64-billion.
Analysts on average expected profit of $3.76 per share on revenue of $9-billion, according to Thomson Reuters I/B/E/S.
Net revenue in fixed income, currency and commodities slid 39 per cent from the third quarter to $1.64-billion, reflecting what Goldman called "generally low client activity levels."
Bond markets were unsettled over European sovereign debt and the Federal Reserve treasury-buying program.
Still, Goldman chief executive officer Lloyd Blankfein in a statement said the bank is "seeing signs of growth and more economic activity" following "difficult" conditions for much of 2010.
In the last week, Citigroup Inc. and JPMorgan Chase & Co have reported weaker quarterly fixed-income trading results.
Results at Goldman may signal what investors can expect when Morgan Stanley and Bank of America Corp. report their quarterly results later this week.
"If Goldman Sachs can't show a strong performance, then good luck to anyone else trying," said Simon Maughan, an analyst at MF Global in London.
Much of Goldman's profit will flow to bankers and traders in the form of lucrative year-end bonuses.
Compensation per employee for 2010 fell 14 per cent from 2009 to about $431,000, and total pay and benefits fell 5 per cent to $15.38-billion.
Still, the ratio of compensation and benefits to net revenue rose to 39.3 per cent from 35.8 per cent.