Goldman Ducks on Q4 Earnings Beat

Andrew Cummings
January 20, 2021

Goldman Sachs Group Inc has eclipsed Wall Street estimates as its fourth quarter profit more than doubled, fueled by another explosive performance in its trading activity and a rise in fees associated with buying a series successful IPOs.

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.

Shares rose 2.3 percent to $308.00. Markets plunged and economic activity declined in the spring as coronavirus spread across the country.

In the quarter, BofA released $828 million from its credit reserves.

Overall revenues rose 18 per cent from the year-ago period to US$11.7 billion.

With its relatively small loan book and heavy exposure to underwriting and trading securities, Goldman was better placed than peers for the environment of the past several months.

Goldman Sachs has increased pay for its bankers to the highest level in a decade following a year in which much of Wall Street emerged unscathed from the pandemic. The business is on track to reach a deposit-growth goal, but it will take at least another year to turn a profit, Solomon said. "But like many innovations, there's a point in time as they start where they have a tendency maybe to go a little bit too far and then need to be pulled back or rebalanced".

Goldman's profit has been less impacted by large provisions for future expected charge-offs, given the nascency of its corporate-banking and consumer-finance offerings.

Low interest rates were the biggest drag on BofA's results compared to a year ago. Goldman held about $8 billion in consumer-loan balances, split roughly equally between its personal-loan business and co-branded credit card with Apple Inc., but performance has been better than executives expected. Mr. Solomon said that Marcus, as Goldman's consumer-banking division is known, is likely to report a larger pretax loss in 2021.

Bank of America on Tuesday reported fourth-quarter earnings of US$5.2 billion, down 23 per cent from the year-ago period on a 10.5 per cent drop in revenues.

Goldman's results reflect that Wall Street had a strong year, despite the pandemic and millions of Americans out of work.

Shares slipped about 1% in midday trading Tuesday.

Goldman's latest performance was all the more impressive as it comfortably absorbed a $ 3 billion blow to its annual profits, after reaching a deal with the US Department of Justice and other US and foreign regulators on his role in the 1MDB corruption scandal in Malaysia.

Revenue at all four businesses rose in the final quarter. The business is still tiny compared to the company's other big revenue generators, only a fraction of the total in 2020.

The bank's return on equity, a key metric of profitability, stood at 21.1% during the quarter.

The stellar quarter also will result in stellar bonuses for Goldman's well-compensated employees.

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