Goldman Profit More Than Doubles, Powered by Trading

Marco Green
January 20, 2021

"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.

Additionally, Mr. Solomon said that Goldman was continuing to spend money to develop new Marcus products, including a digital-investing platform that will debut in the first quarter and an online checking account that will arrive later this year.

Shares slipped about 1% in midday trading Tuesday.

Solomon made Marcus a cornerstone of his broader strategy to make Goldman look more like a full-service lender catering to individuals and global corporations alike. The bank is considering further deals to bulk up Marcus, Reuters reported.

"The bar to do something significant is extremely high, and it's not an easy thing to do", said Solomon.

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

It unveiled a profit of $4.5bn for the fourth quarter, double that for the same period a year ago, while the $9.5bn annual profit exceeded expectations.

Of the six biggest USA banks, Goldman gets the biggest share of its revenue from Wall Street activities including trading and investment banking.

Goldman's most comparable peer, Morgan Stanley, will close the earnings season for the big banks on Wednesday.

Goldman on Tuesday reaffirmed a target to grow consumer deposits to over US$125 billion over five years.

Fueled by the markets' quick recovery from the worst of the pandemic-induced recession, Goldman generated $44.56 billion in annual revenue, the most since 2009, harking back to the last time the bank successfully navigated a crisis and its aftermath.

The bank posted earnings of $12.08 a share, crushing the $7.47 per share estimate of analysts.

In the fourth quarter, Goldman reported a 28% year-on-year increase in advisory business such as mergers and acquisitions, and a 68% increase in fees from underwriting stock and bond issues.

Equities trading and investment banking revenues both comfortably beat forecasts, Oppenheimer analyst Chris Kotowski said. Dips and turns in coronavirus infection rates and policy responses, combined with social-injustice protests and a historic US election created lots of volatility. Interest revenue in the quarter went from $12.14 billion to $10.25 billion.

Trading, Goldman's main revenue-generating engine, surged 43% annually.

Income from investment banking services jumped 27% to $ 2.61 billion in the quarter, mainly on share underwriting, which was up 195% from the same time period. a year ago. The rally in Goldman's stock followed news that the firm reached a $2.9 billion settlement with the Justice Department over a yearslong investigation into its role assisting a corrupt Malaysian government fund known as 1MDB.

Like its Wall Street competitors, Bank of America was able to release hundreds of millions of dollars from its loan-loss reserves - money the bank had set aside earlier in the pandemic to cover loans that might be now be unpayable.

Other reports by Click Lancashire

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