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Investments

Goldman Sachs sets aside plenty of cash for mortgage lawsuits

Still made a handsome 4Q profit

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Goldman Sachs (GS) reported fourth-quarter revenues and profit topping Wall Street estimates, bouyed by a resurgent IPO market that boosted investment banking revenue.

Quarterly net income was $2.33 billion, down from $2.89 billion one year earlier. Earnings translated to $4.60 per share, beating analyst consensus of $4.14 per share and adding to what has been a strong quarter for financials early in the earnings season.

Primary profits at Goldman during the fourth quarter came on the back of the company's investment banking operations, while the investment bank reported "significantly lower net revenues in mortgages."

Revenues in Goldman's fixed income business, which includes mortgages, came in at $1.7 billion, 15% lower than one year earlier. Investment banking revenues jumped to $6 billion for the full year, the second-best year in Goldman's history, with $1.72 billion booked in the fourth quarter. Fourth quarter revenues in investment banking represented a 22% jump from one year earlier and were 47% higher than the linked quarter.

Notably, most of the money the firm set aside for litigation involves mortgage operations.

Provisions for litigation and regulatory proceedings for the fourth quarter of 2013 were $561 million, up 155% from $260 million for the fourth quarter of 2012.

This number includes the settlement with the Federal Reserve Board regarding the independent foreclosure review.

“Our work in advancing our client franchise and in ensuring continued cost discipline has allowed us to provide solid returns even in a somewhat challenging environment,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer.

“We believe that we are well positioned to generate solid returns as the economy continues to heal and provide considerable upside for our shareholders as conditions materially improve," he added.

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