Goldman Sachs reported a nearly fourfold rise in quarterly profit on Wednesday as it benefited, like other big banks, from a surge in trading following Donald Trump’s surprise win in November’s presidential election.
Goldman’s net income attributable to common shareholders soared to US$2.15 billion in the fourth quarter ended December 31 from $574 million a year earlier, when the Wall Street bank was hit with a $5bn legal settlement. Earnings per share jumped to $5.08 from $1.27.
On an adjusted basis, the bank earned $5.08 per share, handily beating the average analysts’ estimate of $4.82, according to Reuters.
Goldman’s revenue from trading fixed-income securities, currencies and commodities shot up 78.3 per cent to $2bn.
Morgan Stanley, Goldman’s closest rival, reported on Tuesday that its revenue from fixed-income trading jumped about 173 per cent in the latest quarter.
While Goldman typically relies more on trading than its competitors, the bank has been trying to shift its model over the last few years to rely less on the business and more on stable markets such as investment management. The bank has also made a push into consumer lending, launching an online platform called Marcus late last year.
Goldman’s total net revenue jumped 12.3 per cent to $8.17bn, beating the average estimate of $7.72bn.
“After a challenging first half, the firm performed well for the remainder of the year as the operating environment improved,” said the chief executive and chairman Lloyd Blankfein.
Goldman’s shares were up slightly in premarket trading, having risen about 30 per cent since the election.
Bank stocks soared in the aftermath of Mr Trump’s win as investors took he view that his policies would lead to a stronger US economy and less-stringent banking regulation.
Goldman, which said in 2016 that it had launched a program to cut $700m in annual costs, said its operating expenses dropped 23 per cent to $4.77bn in the latest quarter.
Full-year expenses fell 18.9 per cent to $20.3bn, the lowest since 2008, the bank said.
Annualized return-on-equity – a measure that shows how well a bank uses shareholder money to generate profit – was 11.4 per cent in the quarter, above the 10 per cent that analysts tend to think is needed to cover a bank’s cost of capital.
Investment banking revenue, which includes income from advising on mergers and acquisitions as well as underwriting bond and share offerings, fell 3.9 per cent to $1.49bn.
The bank maintained its position as the world’s biggest M&A adviser in 2016 with a 35.9 per cent market share of completed deals, according to Reuters data, ahead of Morgan Stanley and JP Morgan.
Revenue from investment management rose 3.4 per cent to $1.61bn.
Citigroup, meanwhile, reported a 7 per cent rise in fourth quarter profits on Wednesday, also helped by a strong performance in trading business.
The company said it earned $3.57bn in the fourth quarter, or $1.14 per share, compared with $3.34bn, or $1.02 per share, in the same period a year earlier. The results were slightly above analysts’ estimates of $1.12 per share.
Citi’s institutional clients group, which includes the firm’s investment bank and trading, reported net income of $2.47bn in the quarter compared with $1.26bn in the same period a year earlier. Bond trading, one of Citi’s specialties, reported a 36 per cent rise in revenue.
Citi’s global consumer banking business, which includes its retail bank and credit card business, had net income of $1.27bn, down 7 per cent from a year earlier. While Citi said the business was helped by the acquisition of the Costco credit card business, other parts of the firm’s business saw declines. Citi has been trying to close or relocate branches to cut expenses.
The US bank posted revenue of $20.29bn in the period. Its adjusted revenue was $17.01bn, which missed Street forecasts. Three analysts surveyed by Zacks expected $17.05bn.
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