Goldman Sachs profit hits over 3-year high as investment banking, trading fuel bumper quarter
By Saeed Azhar, Manya Saini and Noor Zainab Hussain
NEW YORK (Reuters) -Goldman Sachs beat Wall Street estimates and earned its biggest quarterly profit in more than three years as its investment bankers brought in more deal fees, while its traders benefited from active markets.
Shares rose 5.5% in Wednesday morning trading as profit climbed to $4.11 billion, or $11.95 per diluted share, for the fourth quarter ended Dec. 31, compared with $2.01 billion, or $5.48 per diluted share, a year ago.
Its EPS beat the $8.22 expected by analysts, according to estimates compiled by LSEG.
Banking industry executives anticipate better conditions for deals this year as the U.S. Federal Reserve cuts interest rates and President-elect Donald Trump’s pro-business comments fuel optimism among investors.
“There has been a meaningful shift in CEO confidence, particularly following the results of the U.S. election,” CEO David Solomon told analysts on an earnings call. “Additionally, there is a significant backlog from sponsors and an overall increased appetite for dealmaking, supported by an improving regulatory backdrop.”
Goldman’s investment-banking fees rose 24% to $2.05 billion in the fourth quarter, powered by debt underwriting that benefited from strong leveraged finance and corporate bond sales.
An industry-wide recovery in mergers and acquisitions, along with renewed activity in equity and debt markets, lifted results in the second half of 2024 for Wall Street’s top banks.
“We have been bullish on GS stock because we think the market is not fully incorporating the upside potential of a strong M&A cycle,” Chris Kotowski, a banking analyst at Oppenheimer & Co., wrote in a note.
Equity and debt underwriting revenue jumped 98% and 51%, respectively, in the fourth quarter, helped by secondary and initial public offerings, private placements and leveraged finance activity.
Goldman Sachs’ advisory revenue declined by 4% for the quarter, but rose for 2024, owing to a rise in completed deals, the bank said.
Across the global industry, investment-banking revenue increased 26% to $86.8 billion in 2024, with North America surging 33% from a year ago, according to data from Dealogic. Goldman earned the second-highest revenue across banks globally.
BRISK DEALMAKING
Last month, Solomon told a Reuters conference that dealmaking in equities and mergers and acquisitions could exceed 10-year averages in 2025.
Revenue in Goldman’s asset and wealth management arm climbed 8% to $4.72 billion, while revenue at its global banking and markets division increased by 33% to $8.48 billion in the fourth quarter.
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