Goldman Sachs said its fourth-quarter profits dropped by 24% from a year earlier, as the bank had to set aside money to cover its looming settlement with US authorities over its role in a Malaysian sovereign wealth fund scandal.

The investment bank said it earned a profit of 1.72 billion dollars (£1.32 billion) in the quarter, or 4.69 dollars (£3.60) a share, down from a profit of 2.32 billion dollars (£1.78 billion), or 6.11 dollars (£4.69) per share, a year earlier.

The results missed analysts’ expectations for earnings of 5.47 dollars a share.

Despite having a strong quarter in trading, Goldman’s results were marred by significantly higher expenses.

The bank set aside roughly 500 million dollars (£383 million) more to cover its legal expenses in the quarter.

The bank is currently negotiating a settlement over its involvement in 1MDB, a Malaysian government-sponsored investment fund that became a conduit for high-level Malaysian officials to launder money out of the country.

Malaysia’s prime minister was arrested as part of the scandal, and another official is a fugitive and his whereabouts are unknown.

Two former Goldman Sachs bankers have been charged for their role in helping 1MDB launder money.

The bank also had a big jump in its compensation expenses, setting aside 3.05 billion dollars (£2.34 billion) in the quarter to pay its well compensated employees, compared with 1.86 billion dollars (£1.42 billion) a year earlier.

Many of Goldman’s employees earn the bulk of their pay in large year-end bonuses.

For the full year, however, compensation and benefits costs at the bank were basically flat – reflecting the difficult year Goldman had in many of its businesses.

The expenses overshadowed what was a pretty decent quarter for Goldman, reflecting financial markets’ overall performance in the last three months of the year.

Trading revenues were up 33% from a year earlier, led by a massive jump in revenue from trading bonds, commodities and currencies.

For the full year, Goldman had a profit of 7.9 billion dollars (£6.06 billion), down from 9.86 billion dollars (£7.56 billion) in the same period a year ago.