San Francisco Frontiers - Goldman Sachs profits jump on strong equity trading

The New York investment bank reported profits of $1.9 billion, up 58 percent from the year-ago period. Revenues rose seven percent to $11.3 billion.

The fourth quarter enabled a positive finale to a difficult year for Chief Executive David Solomon after earlier quarters saw hefty write-downs and losses tied to the unwinding of large consumer-oriented businesses that Goldman had previously touted.

In the fourth quarter, Goldman Sachs' revenues from equity trading surged 26 percent, while the bank's own holdings in public equities also enjoyed a hefty increase during a heady period for US stocks.

The latter holding is part of Goldman's asset and wealth management business, where revenues were also lifted by higher management fees.

Those line-items made up for drops in merger advisory revenues, revenues tied to fixed income, currency and commodity trading and the drag from a one-time charge to replenish the Federal Deposit Insurance Corporation's emergency fund after last year's emergency actions in response to a crisis hitting mid-sized lenders.

In Goldman's case, this fee came to $529 million.

Results were also dented by $577 million in provisions for credit losses in part from problem credit card loans.

Solomon described the bank's strategy as clarified after a difficult stretch in 2023. Goldman partners and former CEO Lloyd Blankfein were quoted in prominent news articles criticizing Solomon's leadership style and handling of Goldman's foray into consumer banking.

Solomon described 2023 as a "year of execution," according to a press release.

"With everything we achieved in 2023 coupled with our clear and simplified strategy, we have a much stronger platform for 2024," Solomon said.

The divestments demonstrated that it is "important to be nimble and make tough decisions when needed," Solomon said on a conference call with analysts.

Solomon said Goldman is making progress on a simplified structure and should do well in the medium term "provided it is a reasonable environment."

Rival financial heavyweight Morgan Stanley reported a 35 percent drop in profits to $1.4 billion on a one percent rise in revenues to $12.9 billion.

The results included one-time costs of $249 million in legal expenses connected to a settlement announced Friday with US regulators over civil and criminal charges connected to stock trades where it disclosed key information that it promised to keep confidential.

Shares of Goldman rose 1.6 percent in late-morning trading, while Morgan Stanley fell 33.3 percent.

L.Lopez--SFF