US Markets
Tuesday, January 16th, 2024 3:11 pm EDT
Key Points
- Strong Financial Performance: Goldman Sachs reported fourth-quarter results that exceeded analysts’ expectations. The earnings of $5.48 per share and revenue of $11.32 billion surpassed estimates, showcasing a notable 51% increase in earnings from the previous year. The positive performance was attributed to better-than-expected results in the asset and wealth management, as well as platform solutions divisions, driving a 7% growth in companywide revenue.
- Strategic Pivot and Growth Focus: Despite a challenging year marked by dormant capital markets and strategic missteps, CEO David Solomon expressed optimism about Goldman Sachs turning a corner. The bank shifted away from Solomon’s unsuccessful consumer banking efforts, with a renewed focus on the asset and wealth management division. Solomon highlighted the division as the growth engine, benefiting from the rise in private credit and alternative assets. The bank’s 23% jump in asset and wealth management revenue to $4.39 billion reinforced this positive trajectory.
- Mixed Performance in Core Activities: While the overall financial results were strong, Goldman Sachs saw mixed performance in its core activities of investment banking and trading. The equities trading division outperformed expectations, with a 26% increase in revenue to $2.61 billion. However, the fixed income division faced challenges, posting a 24% decline in revenue to $2.03 billion. Investment banking fees also fell by 12% to $1.65 billion. Analysts are keenly observing the potential for recovery in these core activities in 2024, especially given early signs of increased corporate activity in acquisitions and fundraising. The bank’s return on tangible equity for 2023 was 8.1%, falling below its medium-term target of 15% to 17%, reflecting the impact of market conditions. The bank’s cost-cutting measures, including a 7% reduction in headcount, were noted as part of its strategy to address challenges and enhance efficiency.
Goldman Sachs surpassed analysts’ expectations in its fourth-quarter results, reporting earnings of $5.48 per share, a figure that outpaced the estimated $3.51 according to analysts surveyed by LSEG. The company’s revenue for the quarter reached $11.32 billion, exceeding the expected $10.8 billion. The strong performance represents a 51% increase in earnings to $2.01 billion, or $5.48 per share, compared to the previous year when the bank faced challenges from loan loss provisions and increased expenses. The growth was driven by a 7% rise in companywide revenue, particularly fueled by the asset and wealth management and platform solutions divisions.
Goldman Sachs CEO David Solomon, who faced difficulties in the past year due to dormant capital markets and strategic missteps, expressed optimism about the future, highlighting the strength of the asset and wealth management division as a growth engine. The division’s revenue surged 23% to $4.39 billion, surpassing expectations by nearly $550 million, driven by increased revenue from equity and debt investments and rising management fees. The bank credited gains on public equities and markups in debt investments, boosted by favorable market conditions in the fourth quarter.
While other divisions, such as platform solutions, either met or slightly missed expectations, the trading division showcased a mixed performance. Equities trading revenue soared 26% to $2.61 billion, surpassing estimates, while fixed income revenue declined by 24% to $2.03 billion, falling short of expectations. Investment banking fees fell by 12% to $1.65 billion, in line with estimates, reflecting an industry-wide decline in completed acquisitions in the late part of the previous year.
Goldman Sachs, primarily reliant on Wall Street for revenue, reported a return on tangible equity of 8.1% for 2023, well below its medium-term target of 15% to 17%. The bank disclosed a 7% reduction in headcount during the previous year, amounting to 3,200 positions, primarily due to layoffs at the start of 2023. As the last of the major U.S. banks to release results for the period, Goldman Sachs, along with Morgan Stanley, reported its fourth-quarter earnings on Tuesday, distinguishing itself from peers like JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo, which posted results marked by numerous one-time items on the preceding Friday. Analysts will closely monitor Goldman’s potential for recovery in 2024, particularly in its core activities of investment banking and trading, amid early signs of increased corporate activity in acquisitions and fundraising.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/01/16/goldman-sachs-gs-earnings-4q-2023.html
