Goldman Sachs on Tuesday fashion analysts’ expectations for fourth-quarter profit and revenue on strong performance from the firm’s equities traders and investment bankers.
The bank posted earnings of $12.08 a equity, crushing the $7.47 estimate of analysts surveyed by Refinitiv. Revenue of $11.74 billion exceeded expectations by about $1.75 billion.
Appropriates of the New York-based bank slipped 2.3% after jumping 2% in premarket trading.
“We were able to help shoppers navigate a difficult environment, and, as a result, achieved strong results across the franchise, while advancing our strategic immediacies,” CEO David Solomon said in the release. “We hope this year brings much needed stability and a respite from the pandemic, but we abide ready to handle a wide range of outcomes and are poised to meet the needs of our clients.”
Expectations were running prodigal for Solomon. Last week, JPMorgan Chase posted record fourth-quarter trading and advisory results that lifted the bank beat profit estimates.
At Goldman, equities traders produced a 40% bump in revenue from a year earlier to $2.39 billion, enormous the $1.89 billion estimate by roughly half a billion dollars. But like most of its rivals, fixed-income operations missed prospects for the quarter, producing $1.88 billion in revenue, below the $2.06 billion estimate.
Investment banking revenues be upstanding 27% to $2.61 billion, exceeding the $2.15 billion projection, on higher revenues in stock underwriting and completed amalgamations transactions, the firm said.
“Goldman Sachs’ earnings were shockingly good,” said Octavio Marenzi, CEO of superb markets management consultancy Opimas. “We were expecting a strong performance, but Goldman outperformed in almost every occupation line. … Goldman’s activities are squarely focused on investment banking and trading, areas that did well high, but especially well at Goldman.”
In a separate presentation, Goldman said it had made progress against goals given a year ago at its initially ever Investor Day, and reiterated that it was committed to its medium and long term targets.
Of the six biggest U.S. banks, Goldman makes the largest share of its revenue from Wall Street activities, including trading and investment banking. For the past few years, that has been a harm to the firm as retail banking has driven the industry’s record profits. Now, Goldman’s model is proving to be an advantage.
Wide-open retails, thanks to the Federal Reserve’s unprecedented actions earlier in the year, are expected to help usher in the best year for shopper on Wall Street since the Great Recession. Meanwhile, investment bankers are benefiting from surging demand for IPOs and a write down spate of debt issuance.
Goldman’s investment banking division produced record revenue in 2020 of $9.42 billion, thanks to elated stock and bond underwriting. And the firm’s trading division posted its highest annual revenue in a decade, a 43% space from 2019, on surging activity across markets.
Goldman shares climbed 11% in 2020, besting the 4.3% lessen of the KBW Bank Index.
Here are the numbers:
Earnings: $12.08 a share, vs. $7.47 per share expected, according to Refinitiv.
Gate: $11.74 billion, vs. $9.9 billion estimate.