BENGALURU - Goldman Sachs beat estimates for fourth-quarter profit on Jan 16 as its equity traders capitalised on a market recovery and revenue from asset and wealth management rose, offsetting weaker investment banking.

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.

“This was a year of execution for Goldman Sachs,” chief executive 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 1.3 per cent in trading before the bell. They were up 12.3 per cent in 2023, compared with gains of 27 per cent for JPMorgan Chase and 10 per cent for Morgan Stanley.

Goldman’s equity trading revenue jumped 26 per cent in the fourth quarter, while its revenue from asset and wealth management rose 23 per cent to US$4.39 billion (S$5.9 billion).

The unit also booked a gain of US$349 million from a deal to sell part of its wealth business to an independent wealth manager.

Investment banking fees fell 12 per cent to US$1.65 billion, as a decline in mergers and acquisitions offset gains from debt and stock sales.

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

The bank’s profit was US$2.01 billion, or US$5.48 per share, for the latest quarter, compared with US$1.33 billion, or US$3.32 per share, a year earlier.

Analysts on average expected a profit of US$3.51 per share, according to LSEG data.

Headcount

Goldman had a headcount of 45,300 at the end of December, 1 per cent less than in the third quarter and nearly 7 per cent 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 US$16 billion by the collapse of two regional banks in 2023.

It recognised a $529 million expense tied to the fee in the fourth quarter.

Platform solutions boost

Goldman’s platform solutions unit, which houses some of its consumer operations, reported a 12 per cent jump in revenue to US$577 million.

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 that saw it merge 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 2023.

Goldman’s provisions for credit losses fell to US$577 million in the quarter from US$972 million a year earlier.

Meanwhile, it reduced reserves of US$160 million by transferring its General Motors credit card portfolio to a category of assets known as held for sale. General Motors is looking for a new partner to replace Goldman Sachs. REUTERS