Goldman Sachs Fourth-quarter profit on Tuesday beat estimates as its equity traders took advantage of the market recovery and revenue from asset and wealth management offset weak investment banking.
Stock markets have surged as economists and investors have grown confident that the US will survive this recession, Market participants are also debating when the Federal Reserve will cut interest rates, which could act as another catalyst for activity.
“It was a year of execution for Goldman Sachs,” CEO David Solomon said in a statement. “With everything we achieved in 2023, combined with our clear and simplified strategy, we have a very strong platform for 2024.”
The bank’s shares rose 1.3% in trading before the bell. They were up 12.3% compared to a 27% gain last year JPMorgan Chase and for 10% Morgan Stanley,
Goldman’s equity trading revenue rose 26% in the fourth quarter, while its revenue from asset and wealth management rose 23% to $4.39 billion.
The unit also made a profit of $349 million from a deal to sell part of its wealth business to an independent wealth manager.
Investment banking fees fell 12% to $1.65 billion, as a decline in mergers and acquisitions (M&A) offset gains from loan and stock sales.
Revenue from the fixed income, currencies and commodities (FICC) business fell 24% due to lower profits from mortgage products due to interest rate products and weakness in currencies.
The bank’s profit in the latest quarter was $2.01 billion, or $5.48 a share, compared with $1.33 billion, or $3.32 a share, a year earlier.
Analysts, on average, were expecting profit of $3.51 per share, according to LSEG data.
Number of Employees
Goldman’s total at the end of December was 45,300, down 1% from the third quarter and about 7% from the year-ago period.
The bank laid off thousands of employees in 2023, including cuts to its workforce in January, the largest cuts since the 2008 financial crisis.
Goldman is one of the banking giants that will pay a special assessment fee to replenish the government deposit insurance fund (DIF), which was drained of $16 billion due to the collapse of two regional banks last year.
It recognized $529 million of fee-related expense in the fourth quarter.
Platform solutions get a boost
Goldman’s Platform Solutions unit, which includes some of its consumer operations, reported a 12% increase in revenue to $577 million.
The jump was driven by higher average credit card balances, which mitigated the impact of markdowns related to the portfolio of GreenSky loans held for sale.
Goldman is shedding its ill-fated consumer business in 2022 following a restructuring in which it merged its traditional mainstays of trading and investment banking.
GreenSky, which facilitates home improvement loans to consumers, was sold to a consortium of investment firms led by Sixth Street Partners.
Four years after starting the credit card AppleThe Wall Street giant also faces a costly exit from a partnership that other lenders consider too risky and unprofitable.
Reuters reported last month that Goldman may need to reduce the value of its stake to entice bidders to take its place in the partnership.
Goldman’s provision for credit losses fell to $577 million in the quarter from $972 million a year earlier.
Meanwhile, it reduced reserves by $160 million by moving its General Motors credit card portfolio to the category of assets held for sale. General Motors is looking for a new partner to replace Goldman Sachs.
Stock markets have surged as economists and investors have grown confident that the US will survive this recession, Market participants are also debating when the Federal Reserve will cut interest rates, which could act as another catalyst for activity.
“It was a year of execution for Goldman Sachs,” CEO David Solomon said in a statement. “With everything we achieved in 2023, combined with our clear and simplified strategy, we have a very strong platform for 2024.”
The bank’s shares rose 1.3% in trading before the bell. They were up 12.3% compared to a 27% gain last year JPMorgan Chase and for 10% Morgan Stanley,
Goldman’s equity trading revenue rose 26% in the fourth quarter, while its revenue from asset and wealth management rose 23% to $4.39 billion.
The unit also made a profit of $349 million from a deal to sell part of its wealth business to an independent wealth manager.
Investment banking fees fell 12% to $1.65 billion, as a decline in mergers and acquisitions (M&A) offset gains from loan and stock sales.
Revenue from the fixed income, currencies and commodities (FICC) business fell 24% due to lower profits from mortgage products due to interest rate products and weakness in currencies.
The bank’s profit in the latest quarter was $2.01 billion, or $5.48 a share, compared with $1.33 billion, or $3.32 a share, a year earlier.
Analysts, on average, were expecting profit of $3.51 per share, according to LSEG data.
Number of Employees
Goldman’s total at the end of December was 45,300, down 1% from the third quarter and about 7% from the year-ago period.
The bank laid off thousands of employees in 2023, including cuts to its workforce in January, the largest cuts since the 2008 financial crisis.
Goldman is one of the banking giants that will pay a special assessment fee to replenish the government deposit insurance fund (DIF), which was drained of $16 billion due to the collapse of two regional banks last year.
It recognized $529 million of fee-related expense in the fourth quarter.
Platform solutions get a boost
Goldman’s Platform Solutions unit, which includes some of its consumer operations, reported a 12% increase in revenue to $577 million.
The jump was driven by higher average credit card balances, which mitigated the impact of markdowns related to the portfolio of GreenSky loans held for sale.
Goldman is shedding its ill-fated consumer business in 2022 following a restructuring in which it merged its traditional mainstays of trading and investment banking.
GreenSky, which facilitates home improvement loans to consumers, was sold to a consortium of investment firms led by Sixth Street Partners.
Four years after starting the credit card AppleThe Wall Street giant also faces a costly exit from a partnership that other lenders consider too risky and unprofitable.
Reuters reported last month that Goldman may need to reduce the value of its stake to entice bidders to take its place in the partnership.
Goldman’s provision for credit losses fell to $577 million in the quarter from $972 million a year earlier.
Meanwhile, it reduced reserves by $160 million by moving its General Motors credit card portfolio to the category of assets held for sale. General Motors is looking for a new partner to replace Goldman Sachs.
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