Banking behemoth Goldman Sachs Group, Inc. (GS) reported better-than-anticipated fiscal 2020 fourth-quarter results, aided by robust equities trading and investment banking operations. The company also reaffirmed that it is dedicated to achieving its medium-term and long-term targets. Despite the upbeat results, the stock lost $6.81 or 2.26% to close at $294.20. The stock has gained 11% last year and outclassed the 4.3% drop recorded by the KBW Bank Index.
The New York-based Goldman Sachs reported fourth-quarter revenues of $11.741 billion, compared with $9.955 billion in the comparable quarter last year.
For the quarter ended December 31, 2020, net earnings were $4.362 billion, or $12.08 per share, an increase from $1.724 billion, or $4.69 per share in the quarter ended December 31, 2019.
On average, analysts polled by Refinitiv had anticipated the company to post earnings of $7.47 per share on revenues of $9.90 billion.
Commenting on the results, CEO David Solomon said: “We were able to help clients navigate a difficult environment, and, as a result, achieved strong results across the franchise, while advancing our strategic priorities.”
Segment-wise,
- Investment banking revenues increased 27% y-o-y to $2.613 billion. Analysts polled by Refinitiv had anticipated revenues of $2.15 billion. Higher revenues from underwriting and financial advisory divisions paved the way for the increase in investment banking revenues.
- Global markets revenues were $4.265 billion, an increase of 23% from last year.
The equities trading division recorded a 40% rise in revenues to $2.387 billion, surpassing the $1.89 billion estimate.
Fixed income division posted revenues of $1.878 billion, missing the forecast of $2.06 billion.
Goldman Sachs generates a major portion of its revenue from Wall Street activities (trading and investment banking) of the top six US banks.
- Asset management revenues were $3.211 billion, up 7% on a y-o-y basis. Higher revenues in lending and debt investments contributed to the overall revenue growth.
- Consumer & wealth management revenues were $1.652 billion, compared with $1.408 billion in the prior-year period. Specifically, wealth management reported revenues of $1.31 billion, up 11% y-o-y. The increase primarily reflects higher average assets under management and an increase in transaction volumes. Consumer banking revenues rose by 52% to $347 million, reflecting an increase in deposit and credit card loan balances.
For 4Q 2020, the company’s provision for credit losses was $293 million, a decrease of 13% from 4Q 2019. Operating expenses declined 19% y-o-y to $5.91 billion. Net provisions for litigation and regulatory proceedings were $24 million in Q4 2020, compared with $1.09 billion in Q4 2019.
Earlier on January 15th, the Company’s Board had declared a dividend of $1.25 per share, payable on March 30, 2021.
The quarterly beat is expected to turn the stock slightly bullish in the days ahead.
Technically, the stock has broken above the long-term resistance at 230. The stock is also trading above its 50-day moving average, while the MACD indicator makes new highs. Therefore, we are expecting the stock to appreciate in the days ahead.
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