Goldman Sachs (GS) stock fell 6.5% on Tuesday, October 17, after the legendary investment bank posted worse-than-expected Q4 earnings hurt by higher-than-expected expenses combined with a slump in investment banking deals. Earnings per share of $3.32 vs. $5.48 consensus came on weaker revenue of $10.59 billion vs. $10.83 billion estimate.

In the company's Q4 earnings call, CEO Denis Coleman suggested the Goldman's Platform Solutions unit, which includes its consumer-focused GreenSky, credit card, and Marcus units, incurred a jaw-dropping $1.8 billion in expenses for the entire 2022. That included more than $200 million of transaction and integration-related costs driven by its GreenSky and GM card portfolio acquisitions.

Compensation and benefits expenses jumped to $3.76 billion, higher than the $3.28 billion consensus, from $3.61 billion in Q3 and from $3.25 billion in Q4 2021. While expenses were rising, the company's Global Banking and Markets revenue declined 14% on both QoQ and YoY bases as tighter financial conditions lead to a drought in M&A activity.

As a result, Goldman's total operating expenses for Q4 surged to $8.09 billion, exceeding the $7.27 billion consensus forecast, from $7.70 billion in Q3 and from $7.27 billion in Q4 2021.

Remarkably, as we remember, Goldman Sachs laid off earlier the previous week 3,200 staff employees around the world. The figure represented the biggest layoffs at the bank since the 2008 global financial crisis. As a result, GS’s headcount fell to 48,500 at Dec. 31, 2022 vs. 49,100 at Sept. 30.

The major takeaway from this strangely weak report is that GS’s challenges were caused by bloated expenses, and may be limited to just the quality of its leadership. Investors should refrain from making far-reaching forecasts and conclusions at this point.