Market recovery helps buoy Goldman Sachs’ profit

Goldman Sachs’ profit rose 51% in the fourth quarter as its equity traders capitalised on a recovery in markets and revenue from its asset and wealth management business rose, offsetting weakness in investment banking.

The bank reported a profit of $2.01bn, or $5.48 a share, for the latest quarter, compared with $1.33bn, or $3.32 a share, a year earlier.

“This was a year of execution for Goldman Sachs,” CEO David Solomon said in a statement. “With everything we achieved in 2023, coupled with our clear and simplified strategy, we have a much stronger platform for 2024.”

The bank’s shares climbed 1.7% to $384.50 in trading before the bell. They were up 12.3% in 2023, compared with gains of 27% for JPMorgan Chase and 10% for Morgan Stanley.

Stock markets have rallied as economists and investors grow more confident the US will avoid a recession. Market participants are also debating when the Federal Reserve will cut interest rates, which could act as another catalyst for activity.

Goldman’s equity trading revenue jumped 26% in the fourth quarter. Revenue from the asset and wealth management business rose 23% to $4.39bn, helped by gains from equity and debt investments.

Investment banking fees fell 12% to $1.65bn, as a decline in mergers & acquisitions (M&A) offset gains from debt and stock sales.

Revenue from fixed income, currencies and commodities trading fell 24% as weakness in interest rate products and currencies dragged down gains from mortgage products.

Headcount

Goldman had a headcount of 45,300 at the end of December, 1% less than in the third quarter and nearly 7% lower than in the year-earlier period. The bank laid off thousands of employees in 2023, including cuts to its workforce in January that were the largest since the 2008 financial crisis.

Goldman is among the banking giants that will pay a special assessment fee to refill a government deposit insurance fund that was drained of $16bn by the collapse of two regional banks in 2023. It recognised a $529m expense tied to the fee in the fourth quarter.

Goldman’s platform solutions unit, which houses some of its consumer operations, reported a 12% jump in revenue to $577m. The jump was driven by higher average credit card balances, which cushioned the hit from markdowns related to the portfolio of GreenSky loans held for sale.

Goldman has been slimming down its ill-fated consumer business, after a reorganisation in 2022 in which it merged its traditional mainstays of trading and investment banking.

GreenSky, which facilitates home improvement loans for consumers, was sold to a consortium of investment firms led by Sixth Street Partners.

Four years after introducing a credit card with Apple, the Wall Street giant also faces a costly exit from a partnership that is seen by other lenders as too risky and unprofitable.

Goldman may need to reduce the value of its stake to tempt bidders to take its place in the partnership, Reuters reported in December. It also plans to scrap co-branded credit cards with General Motors.

Provision for credit losses was $577m, compared with $972m a year earlier, Goldman said. The bank reduced $160m of reserves related to the transfer of the General Motors card portfolio held for sale.

Reuters