NEW YORK: Goldman Sachs said on Tuesday the firm's fourth-quarter profit more than doubled on a strong performance across operations and lower costs.
Goldman profits soared to US$4.36 billion (RM17.8 billion) in the final quarter of the year, a 153% increase compared with the year-ago level, again underscoring the investment bank's might at a time when other sectors have been devastated by the coronavirus pandemic.
Revenues rose 18% to US$11.74 billion.
Goldman's results reflected surging revenues in financial advising services, good trading activity and much lower expenses for litigation and regulatory matters.
And amid the Covid-19 restrictions, the financial giant saw lower travel and entertainment costs.
"It was a challenging year on many fronts, and I am deeply proud of how our people helped clients respond to the economic disruption brought on by the pandemic and the extreme market volatility experienced over the past months," chief executive David Solomon said.
"We hope this year brings needed stability and a respite from the pandemic, but we remain ready to handle a wide range of outcomes."
Since taking over the reins from Lloyd Blankfein in 2018, Solomon has emphasised that he wants to reduce the bank's reliance on trading and investment banking. He wants to grow businesses with more predictable businesses like consumer banking, mass-market wealth management and managing cash for companies.
Revenue from global markets, which houses Goldman's trading business, registered its best annual performance in a decade as investors churned their portfolios at the end of a roller-coaster year for financial markets amid the Covid-19 pandemic.
Trading, Goldman's main revenue-generating engine, surged 43% annually. On a quarterly basis, revenue from the unit jumped 23% to US$4.27 billion.
Investment banking revenue jumped 27% to US$2.61 billion during the quarter, driven mainly by equity underwriting, which was up 195% from the same period last year.
Equities trading and investment banking revenues both comfortably beat forecasts, Oppenheimer analyst Chris Kotowski said.
"It was an exceptionally strong quarter," he said.
The bank's shares surged 2.6% in early trading, adding to a 20% gain in the past year. Goldman's shares hit a record high of US$307.87 last week, giving it a market cap of over US$100 billion.
Goldman's latest performance was all the more impressive, as it comfortably absorbed a US$3 billion hit to its annual profits, after reaching a settlement with the US Department of Justice and other US and overseas regulators over its role in Malaysia's 1MDB corruption scandal.
Revenue at all four businesses rose in the final quarter. Goldman's asset management businesses also benefited from higher lending and debt investments, rising 7% to US$3.21 billion.
Unlike larger peers JPMorgan and Bank of America, Goldman has a relatively small consumer business, which has limited its exposure to loan defaults amid the pandemic and allowed it to focus on its core strength of closing deals.
Even so, Solomon is doubling down on Marcus, its consumer bank, making it a cornerstone of his broader strategy to make Goldman look more like a typical Main Street lender.
Consumer banking revenue rose 52% in the quarter to US$347 million and jumped 40% to US$1.21 billion on an annual basis. The business is still minuscule compared to other large revenue-generators at the firm, representing just a fraction of the total in 2020.
Goldman on Tuesday reaffirmed a target to grow consumer deposits to over US$125 billion over five years.
Goldman reiterated the three-year targets it set for profitability and expense savings last January, as it stayed on track with its long-term cost-cutting and returns initiatives.
The bank's return on equity, a key metric of profitability, stood at 21.1% during the quarter.
Full-year provision for credit losses jumped to US$3.1 billion, compared to US$1.07 billion last year, as the bank set aside additional reserves due to the impact of the Covid-19 pandemic. – AFP, Reuters
Solomon has emphasised that he wants to reduce the bank's reliance on trading and investment banking. – AFPPIX
