Goldman Sachs beats driven by strong IB performance
2min read Goldman Sachs (GS) delivered a robust Q4 2024 earnings report, significantly exceeding analyst expectations for both revenue and earnings per share (EPS). The bank reported EPS of $11.95, well above the estimated $8.22, while net revenue came in at $13.87 billion, surpassing the consensus of $12.37 billion. This marked a 23% year-over-year increase in revenue and reflected a doubling of profit to $4.11 billion. The results were bolstered by strong performances in trading and investment banking, with higher equities and fixed-income trading revenue contributing to the beat.
The Global Banking & Markets segment was a standout, generating $8.48 billion in revenue, a 33% increase year-over-year and ahead of the $7.56 billion estimate. Fixed Income, Currencies, and Commodities (FICC) trading revenue surged 35% to $2.74 billion, outperforming the $2.44 billion expectation, driven by gains in currencies, mortgages, and credit products. Equities trading revenue rose 32% to $3.45 billion, exceeding the $3.02 billion estimate, fueled by robust activity in cash products and prime financing. Investment banking revenue climbed 24% to $2.06 billion, supported by a 98% spike in equity underwriting revenue and a 51% rise in debt underwriting revenue, offset slightly by a 4.5% decline in advisory revenue.
CEO David Solomon highlighted the firm’s achievements and optimism, stating, “With an improving operating backdrop and growing CEO confidence, we are harnessing the power of One Goldman Sachs to continue to serve our clients with excellence and create further value for our shareholders.” Solomon emphasized the rebound in Wall Street activity, particularly in mergers and acquisitions (M&A) and stock issuance, which positioned Goldman to capitalize on renewed client demand and a more favorable regulatory and economic environment.
Goldman’s asset and wealth management division also performed well, reporting revenue of $4.72 billion, an 8% year-over-year increase and 26% sequential growth, surpassing estimates by $560 million. The division benefited from higher management fees, increased incentive fees from harvesting activities, and growth in private banking and lending revenues. Total assets under supervision (AUS) rose to $3.14 trillion, with net inflows of $92 billion for the quarter, reflecting the firm’s strong client engagement.
Looking ahead, Goldman’s outlook suggests continued momentum into 2025. The firm reaffirmed its medium-term growth targets for asset and wealth management, projecting high-single-digit annual growth. Additionally, Goldman’s annualized return on equity (ROE) for Q4 reached 14.6%, exceeding the estimated 9.98%, while its return on tangible common equity (ROTCE) stood at 15.5%, above the 10.6% forecast. The bank’s efficiency ratio improved to 59.6%, beating the 67% estimate, highlighting ongoing cost discipline.
Despite the strong results, Goldman’s advisory revenue fell slightly below expectations at $960 million, compared to the $1.02 billion forecast, reflecting challenges in deal advisory amidst a competitive landscape. Nonetheless, the firm’s investment banking fee backlog grew, suggesting a positive trajectory for deal-making activity in the near term.
Shares of Goldman Sachs rose 2% in premarket trading following the earnings announcement. While the stock has gained nearly 50% over the past year, concerns about valuation at current levels could limit further upside, particularly with resistance near the $400 mark. However, the bank’s robust Q4 performance, strategic focus on core business areas, and favorable market conditions position it well for sustained growth in 2025 and beyond. Investors and analysts will watch closely for further clarity on Goldman’s ability to sustain its momentum amid evolving market dynamics.
