Goldman Sachs profit
soars on post-election surge in trading
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[January 18, 2017]
By Olivia Oran and Richa Naidu
Sachs Group Inc reported a nearly fourfold rise in quarterly profit on
Wednesday, benefiting from a surge in trading following Donald Trump's
surprise win in the U.S. presidential election.
The fifth largest U.S. bank by assets, which relies more on revenue from
trading stocks and bonds than other Wall Street companies, posted a 25
percent jump in trading in the fourth quarter compared with the prior
Goldman reported revenue from trading fixed income, currency and
commodities soared 78 percent to over $2 billion, making the business
the biggest revenue driver for the firm.
Morgan Stanley <MS.N>, Goldman's closest rival, reported on Tuesday that
revenue from fixed-income trading more than doubled in the latest
Equities revenue at Goldman fell 9 percent to $1.6 billion. 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 $2.2 billion in
the quarter from $574 million a year earlier, when the Wall Street bank
was hit with a $5 billion 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 percent to $8.2 billion, above the average
estimate of $7.7 billion.
"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.
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A view of the Goldman Sachs stall on the floor of the New York Stock
Exchange July 16, 2013. REUTERS/Brendan McDermid/File Photo
Goldman shares edged up nearly 1 percent in premarket trading, having risen
about 30 percent since the election. Bank stocks soared in the aftermath of
Trump's win as investors bet that his policies would lead to a stronger U.S.
economy and less stringent banking regulation.
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 $700 million in annual costs,
said operating expenses dropped 23 percent to $4.8 billion in the latest
Full-year expenses fell 18.9 percent to $20.3 billion, 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 percent in the quarter, above the
10 percent 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 percent
to $1.5 billion.
The bank maintained its position as the world's No. 1 M&A adviser in 2016 with a
35.9 percent 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 percent to $1.6 billion.
(Reporting by Richa Naidu in Bengaluru and Olivia Oran in New York; Editing by
Ted Kerr and Jeffrey Benkoe)
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