Goldman Sachs, the prominent New York-based investment bank, reported strong fourth quarter results on Tuesday January 16, 2024, handily beating analyst estimates. The results were driven by a robust performance in Goldman’s asset and wealth management divisions, offsetting declines in traditional businesses like investment banking and trading.
Earnings per share came in at $5.48, a 51% increase versus the same quarter last year and well above the $3.62 forecast by analysts surveyed by FactSet. Overall net revenue hit $11.32 billion for the quarter, up 7% year-over-year and surpassing the expected $10.8 billion.
The standout segment was asset and wealth management, where revenues soared 23% compared to Q4 2021. This reflects Goldman’s strategic pivot towards steadier, fee-based revenue streams and away from volatile trading and dealmaking activities. With over $2 trillion in assets under supervision, the asset and wealth unit now accounts for over 30% of Goldman’s total revenues.
Speaking on the strong quarterly performance, Goldman Sachs CEO David Solomon emphasized the success of the firm’s diversification into “higher and more durable sources of revenues.” This ongoing transformation aims to make Goldman less dependent on market fluctuations.
Meanwhile, revenues from investment banking declined 14% year-over-year, reflecting a broad slowdown in deal activity across the industry in 2022. Trading revenues also slipped 5% versus last year, though increased client activity toward the end of the year helped offset some of the weakness seen earlier in 2022.
Like its peers, Goldman took a $529 million charge related to an insurance fund assessment by the Federal Deposit Insurance Corporation. This had been expected following bank failures in 2021 and 2022. Even with the charge, return on equity came in at 16% for 2022 – above the firm’s 14% target.
As part of its cost-cutting initiatives, Goldman reduced headcount by 7% last year, bringing total employees down to around 45,300 globally. This rightsizing aims to boost efficiency ratios as the economic outlook remains uncertain heading into 2023.
With its repositioning showing tangible results this quarter, Goldman Sachs appears to be on the right track to deliver more consistent, less volatile earnings going forward. Key drivers will be growing its mass-affluent and middle-market client franchises, while optimizing its trading and investment banking footprints.
Tuesday’s earnings beat helps reinforce Goldman’s status as a premier global investment bank, with sufficient scale and breadth to thrive across market cycles. If the firm can continue executing on its strategic pivot, it will be well positioned to produce sustainable long-term value for shareholders.