In news that probably won’t surprise anyone, Goldman easily beat estimates Tuesday when the firm reported fourth quarter results.
Revenue of $11.74 billion was up 18%, and topped even the most optimistic forecast. The range was $8.81 billion to $10.97 billion. EPS was $12.08. I’m not even sure that’s comparable to estimates. Consensus was apparently looking for $7.31. (Pour one out for consensus.)
Net revenues were higher across every segment. The bank called the increase in trading “significant.”
If you’re curious as to what “significant” means, in the fourth quarter it meant that equities trading revenue was $2.39 billion. That represented a 40% YoY gain, and handily bested estimates. The street was looking for less than $2 billion.
FICC wasn’t as robust. In fact, $1.88 billion was a slight miss. The bank noted “significantly higher net revenues in credit products and commodities and higher net revenues in currencies, partially offset by significantly lower net revenues in interest rate products and lower net revenues in mortgages.”
All told, global markets revenue of $4.27 billion in the fourth quarter represented a 23% increase from Q4 2019, and easily cleared the bar. The market was looking for $3.98 billion.
In IB, revenue was $2.61 billion. If you’re keeping track at home, that’s up 27% from Q4 2019 and 33% from the third quarter. Equities underwriting in Q4 rose 195% YoY. The bank cited “higher industry-wide activity.” Debt underwriting, however, was down 12% (and 8% sequentially). Overall, underwriting revenue of $1.64 billion was up 68%. Advisory revenues rose 115% from Q3 and 28% from Q4 2019 thanks to (obviously) M&A.
Asset management (which used to be investing and lending before Goldman revamped how it breaks down results by division), looked decent. Net revenues of $3.21 billion in Q4 were up 7% on-year and 16% sequentially. Goldman noted “significantly lower net gains from investments in private equities, partially offset by significantly higher net gains from investments in public equities.” (You know what they say: “Go significantly, or go home.”)
Lending and debt investments jumped nearly 50% from Q4 2019 thanks to tighter corporate credit spreads during the quarter.
Finally, revenue in consumer and wealth management, which is home to Marcus and Goldman’s card venture with Apple, rose 17% (and 11% QoQ).
In consumer specifically (which is small for Goldman, but growing), revenues were $347 million. That sounds small. And it is. But “they’re coming for you,” so to speak. That figure represented a 52% increase from Q4 2019 on “higher deposit and credit card loan balances.”
Expenses for the quarter were down 19% from the same period a year ago and down 5% sequentially. There’s some fun, euphemistic color on that in the presentation, that finds Goldman using language that describes a number of readily identifiable events without naming them.
“The decrease in operating expenses compared with the fourth quarter of 2019 was primarily due to significantly lower net provisions for litigation and regulatory proceedings,” the bank said, adding that “in addition, travel and entertainment expenses and occupancy related expenses were lower.”
Goldman also noted that charitable contributions in the fourth quarter of 2020 were “significantly” higher.
The bank’s effective tax rate for 2020 was 24.2%. (What was yours?) That represented a drop from the first nine months, which the bank said was due to a decline in the impact of non-deductible litigation for the full year versus the first three quarters.
For 2020, Goldman’s revenue was $44.56 billion, the highest since 2009. EPS was $24.74. Among other highlights, Goldman reported record assets under management and the highest full-year trading revenues in a decade.
David Solomon praised “our people,” who he said “responded admirably to a series of professional and personal challenges, while working from home or in offices that were reshaped dramatically.”
It was only “thanks to their perseverance” that Goldman was “able to help clients navigate a difficult environment, and, as a result, achieve strong results across the franchise.”
Just God’s work, as it were.