On Tuesday local time in the United States, globally renowned investment bank Goldman Sachs released significantly better than expected fourth quarter financial reports, demonstrating the results of its strategic 180 major transformations.
(Source: Goldman Sachs)
Let's briefly review the financial data first. Goldman Sachs achieved a revenue of $11.32 billion in the fourth quarter of last year, a slight increase of 7%, better than analysts' expectations of $10.8 billion; In terms of profit, it surged by 51% year-on-year to $2.01 billion, equivalent to a earnings per share of nearly $5.5, far exceeding analyst expectations of $3.51.
Like other banks, Goldman Sachs also provisioned $529 million in related expenses in its fourth quarter report to supplement the deficit of the Federal Deposit Insurance Fund last year. Looking at the entire year of 2023, Goldman Sachs' total revenue was $46.25 billion, a decrease of approximately 2%, while profits decreased by 24% year-on-year to $8.52 billion.
Strategic transformation demonstrates effectiveness
For Goldman Sachs CEO David Solomon, the past year has been a year of ups and downs. Due to the decision to enter the retail business, the company fell into a quagmire, and under heavy pressure, Solomon had to give up his hobby of becoming a DJ. Public information shows that Solomon (formerly known as DJ D-Sol) has not attended any major music festivals since the Lollapalooza music festival in July 2022.
After realizing that the current market environment was not suitable for retail business, Goldman Sachs quickly shifted its focus to asset management and wealth management businesses. The financial report shows that Goldman Sachs' asset management and wealth management business revenue reached $4.39 billion in the fourth quarter of last year, nearly $550 million higher than analyst expectations. The strong appreciation of the stock and bond markets in the fourth quarter of last year, as well as the increase in management expenses, were the main reasons.
In the fourth quarter of 2023, Goldman Sachs not only announced the suspension of its retail consumer business with Apple, but also sold consumer lending firm GreenSky at a significant discount.
A few days ago, there were also reports that Goldman Sachs is vigorously developing its loan business for high net worth clients, despite the relatively calm IPO, M&A, and trading sentiment. It is reported that the private banking clients, wealthy individuals, and families that Goldman Sachs focuses on developing have an average asset of $60 million in this bank. From the perspective of banks, providing loans to high net worth users is also an important channel to win other businesses.
It is reported that Goldman Sachs' wealth management department has recently launched a new type of loan - customers can use the money they invest in low liquidity projects such as private equity funds and private credit as collateral. As for whether the money will be used to buy luxury cars and houses or further engage in financial investment after lending, Goldman Sachs will not intervene.
Solomon also stated in its financial report that with all the achievements of the company in 2023, coupled with a clear and simplified strategy, we now have a stronger platform for 2024.
Investment banking business awaits recovery
Apart from wealth management, Goldman Sachs' other businesses can only be said to be unsatisfactory. The most closely watched investment banking fee revenue reached $1.65 billion in Q4, roughly in line with market expectations. Investors are still waiting for signals of a recovery in financial market business, and a series of merger and acquisition transactions in early 2024 have also shown a state of many companies being eager and waiting for a long time.
In terms of trading departments, there is a situation of strong stocks and weak bonds. Goldman Sachs Q4 securities trading revenue increased by 26% year-on-year to $2.61 billion, with an expected revenue of $2.22 billion; Fixed income transaction revenue decreased by 24% year-on-year to $2.03 billion, with an expected revenue of $2.53 billion.
Unlike other diversified peers, most of Goldman Sachs' revenue comes from various transactions, so it is easy for its performance to significantly strengthen during good market times; When the market situation is not good, it will also underperform its peers. In 2023, Goldman Sachs' tangible common equity return rate was only 8.1%, lower than the bank's mid-term target of 15% -17%.
Goldman Sachs also disclosed in its latest financial report that after experiencing a wave of layoffs in 2023, the company's workforce has decreased by 7% in the past year.
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