Goldman Sachs has taken an extra $2bn of legal charges in the second quarter to reflect the cost of settling a key case in the 1MDB scandal, wiping out almost all the profits the bank made in the three months to June 30.
The extra provisions, which the bank signalled but did not quantify when it reported a $3.9bn settlement with Malaysia on July 24, are included in the final quarterly accounts submitted to the US Securities and Exchange Commission.
The added $2bn wiped out almost all $2.2bn profits Goldman made in a quarter when surging trading revenues and higher investment banking fees buffeted the impact of an initial $950m of legal charges and higher loan-loss provisions.
Goldman is battling to settle a case with the Department of Justice over the 1MDB money laundering and bribery scandal in which much of the $6.5bn raised by Goldman for the Malaysian state fund was plundered.
Insiders say the Malaysian settlement should be a catalyst for resolving the US case.
In Friday’s filing, Goldman said discussions, “which are being principally led by the DoJ, are progressing”.
“There can be no assurance that the discussions will lead to resolution of any of those matters,” the bank added.
The bank said the “reasonably possible” total loss from all outstanding litigation matters amounts to $900m above its aggregate litigation reserves.
Analysts largely welcomed the settlement of the Malaysian case, which includes a cash payment of $2.5bn and a guarantee that Malaysia will get back at least $1.4bn of the money that was siphoned off and spent on everything from luxury art to high-end property.
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