Goldman Sachs Group Inc. significantly exceeded fourth-quarter profit estimates, driven by a record performance in its equity trading division. The firm’s strategic shift away from consumer banking and towards investment banking and money management has yielded positive results.
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Goldman Sachs headquarters in New York City.
Record-Breaking Performance in Equity Trading Fuels Growth
Goldman Sachs reported fourth-quarter profits of $4.1 billion, more than double the previous year’s figures. This surge was fueled by robust performance in its investment bank, expansion in its money-management business, and a surprising $472 million gain from balance-sheet investments. The bank’s equity traders achieved their best year on record, contributing significantly to the overall positive results. This strong performance follows a successful year for Goldman Sachs, with its stock outperforming other major US banks in 2024 with a 48% increase.
Strategic Shift and Positive Outlook Drive Investor Confidence
CEO David Solomon expressed optimism about the firm’s progress, stating that they have met or exceeded almost all of the strategic targets set five years ago. The bank highlighted increasing CEO confidence, growing activity from buyout firms, and potential easing of regulatory proposals as key factors contributing to improved results. Revenue for the fourth quarter reached $13.87 billion, also surpassing expectations. As a result, Goldman Sachs’s stock price now trades at almost 1.7 times its book value, a significant improvement from the previous year.
Strong Performance Across Key Divisions
The fixed-income trading business generated $2.74 billion in revenue, boosted by gains in currencies, mortgages, and credit products. The stock-trading unit recorded $3.45 billion in revenue for the quarter, culminating in a record annual revenue of $13.4 billion for the entire year. Investment-banking revenue reached $2.05 billion, slightly exceeding analyst estimates. While Goldman Sachs’s merger advisory fees of $960 million were strong, they trailed behind competitor JPMorgan Chase & Co., which reported $1.1 billion in the same category.
The asset- and wealth-management division posted revenue of $4.72 billion, an 8% increase year-over-year. Full-year management fees from this unit exceeded $10 billion, with assets under management growing to $3.1 trillion. A significant gain in equity investments, specifically from legacy investments the firm is winding down, further bolstered these results. The platform solutions unit, which includes transaction banking, financial technology businesses, and the Apple Card partnership, reported $669 million in revenue, a 16% year-over-year increase. CEO Solomon confirmed the Apple Card partnership contract extends to 2030, though acknowledged the possibility of earlier termination.
Compensation and Future Outlook
Goldman Sachs allocated $16.7 billion for compensation and benefits, reflecting an 8% increase from the previous year. The firm’s return on equity reached 14.6%, exceeding expectations and aligning with its long-term targets. This positive momentum, coupled with the firm’s strategic repositioning, indicates a strong outlook for Goldman Sachs in the coming year. This successful quarter underscores the effectiveness of Goldman Sachs’s strategic shift and positions the firm for continued growth in the evolving financial landscape. The bank’s focus on its core strengths in investment banking and money management, along with its record-breaking equity trading performance, has solidified its position as a leader in the financial industry.
