By Anirban Sen and Matt Scuffham
(Reuters) – Goldman Sachs Group Inc (NYSE:) dwarfed Wall Road estimates as its fourth-quarter revenue greater than doubled, powered by one other blowout efficiency at its buying and selling enterprise and a surge in charges from underwriting a sequence of blockbuster IPOs.
Income from world markets, which homes the financial institution’s buying and selling enterprise, registered its greatest annual efficiency in a decade as traders churned their portfolios on the finish of a roller-coaster 12 months for monetary markets amid the COVID-19 pandemic.
Buying and selling, Goldman’s most important revenue-generating engine, surged 43% yearly. On a quarterly foundation, income from the unit jumped 23% to $4.27 billion.
Funding banking income jumped 27% to $2.61 billion in the course of the quarter, pushed primarily by fairness underwriting, which was up 195% from the identical interval final 12 months.
Equities buying and selling and funding banking revenues each comfortably beat forecasts, Oppenheimer analyst Chris Kotowski mentioned.
“It was an exceptionally sturdy quarter,” he mentioned.
The financial institution’s shares surged 2.6% in early buying and selling, including to a 20% achieve prior to now 12 months. Goldman’s shares hit a report excessive of $307.87 final week, giving it a market cap of over $100 billion.
Whole income climbed 18% to $11.74 billion. The financial institution’s web earnings relevant to widespread shareholders rose to $4.36 billion, or $12.08 per share, within the quarter ended Dec. 31.
Analysts had anticipated a revenue of $7.47 per share on common, in accordance with IBES knowledge from Refinitiv.
“We hope this 12 months brings a lot wanted stability and a respite from the pandemic, however we stay able to deal with a variety of outcomes,” Chief Government David Solomon mentioned.
Goldman’s newest efficiency was all of the extra spectacular, because it comfortably absorbed a $3-billion hit to its annual earnings, after reaching a settlement with the U.S. Division of Justice and different U.S. and abroad regulators over its function in Malaysia’s 1MDB corruption scandal.
Income in any respect 4 companies rose within the last quarter. Goldman’s asset administration companies additionally benefited from larger lending and debt investments, rising 7% to $3.21 billion.
Not like bigger friends JPMorgan (NYSE:) and Financial institution of America (NYSE:), Goldman has a comparatively small client enterprise, which has restricted its publicity to mortgage defaults amid the pandemic and allowed it to deal with its core power of closing offers.
Even so, Solomon is doubling down on Marcus, its client financial institution, making it a cornerstone of his broader technique to make Goldman look extra like a typical Major Road lender.
Shopper banking income rose 52% within the quarter to $347 million and jumped 40% to $1.21 billion on an annual foundation. The enterprise continues to be minuscule in comparison with different giant revenue-generators on the agency, representing only a fraction of the entire in 2020.
Goldman on Tuesday re-affirmed a goal to develop client deposits to over $125 billion over 5 years.
Since taking up the reins from Lloyd Blankfein in 2018, Solomon has emphasised that he needs to cut back the financial institution’s reliance on buying and selling and funding banking. He needs to develop companies with extra predictable companies like client banking, mass-market wealth administration and managing money for firms.
Goldman Sachs reiterated the three-year targets it set for profitability and expense financial savings final January, because it stayed on monitor with its long-term cost-cutting and returns initiatives.
The financial institution’s return on fairness, a key metric of profitability, stood at 21.1% in the course of the quarter.
Full-year provision for credit score losses jumped to $3.1 billion, in comparison with $1.07 billion final 12 months, because the financial institution put aside extra reserves because of the affect of the COVID-19 pandemic.