Goldman Sachs Group reported a nearly fourfold rise in quarterly profit yesterday, benefiting from a surge in trading following Donald Trump’s surprise win in the US presidential election.
The fifth largest US bank by assets, which relies more on revenue from trading stocks and bonds than other Wall Street companies, posted a 25% jump in trading in the fourth quarter compared with the prior year.
Goldman reported revenue from trading fixed income, currency and commodities soared 78% to over $2bn, making the business the biggest revenue driver for the firm.
Equities revenue at Goldman fell 9% to $1.6bn.
The bank relies heavily on hedge fund clients, which drove less trading activity at the end of 2016, UBS analyst Brennan Hawken said.
While Goldman typically relies more on trading than its competitors, it has been trying over the last few years to wean itself off the business and move to stable markets such as investment management.
Goldman has also made a push into consumer lending, launching an online platform called Marcus late last year.
Net income attributable to common shareholders soared to $2.2bn in the quarter from $574mn a year earlier, when the Wall Street bank was hit with a $5bn legal settlement.
Earnings per share rose to $5.08 from $1.27.
On an adjusted basis, the bank earned $5.08 per share, beating the average analyst estimate of $4.82, according to Thomson Reuters I/B/E/S.
Total net revenue jumped 12.3% to $8.2bn, above the average estimate of $7.7bn.
“After a challenging first half, the firm performed well for the remainder of the year as the operating environment improved,” chief executive officer and Chairman Lloyd Blankfein said in a statement.
Gary Cohn, Blankfein’s longtime No 2, left Goldman during the fourth quarter to serve as director of the National Economic Council in the Trump administration.
Chief financial officer Harvey Schwartz and investment banking co-head David Solomon have replaced Cohn as co-presidents of the firm.
Goldman, which launched a program in 2016 to cut $700mn in annual costs, said operating expenses dropped 23% to $4.8bn in the latest quarter.
Full-year expenses fell 18.9% to $20.3bn, the lowest since 2008, the bank said.
Annualised return on equity, a measure that shows how well a bank uses shareholder money to generate profit, was 11.4% in the quarter, above the 10% that analysts believe is needed to cover a bank’s cost of capital.
Investment banking revenue, including income from advising on mergers and acquisitions as well as underwriting bond and share offerings, fell 3.9% to $1.5bn.
The bank maintained its position as the world’s No 1 M&A adviser in 2016 with a 35.9% market share of completed deals, according to Thomson Reuters data, ahead of Morgan Stanley and JPMorgan Chase & Co.
Revenue from investment management rose 3.4% to $1.6bn.