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The economy and the stock market still appear to be operating in two different worlds — and that’s working out for Goldman Sachs.
As consumer banks continue to deal with the wreckage that the pandemic has wrought on jobs and wages, the Wall Street giant cranked out surprisingly strong profits amid a historically frothy market for equities and IPOs.
Goldman on Tuesday reported fourth-quarter earnings per share of $12.08, smashing the consensus analyst estimate of $7.47 per share. The megabank’s revenue was $11.74 billion, also significantly higher than the $9.9 billion estimate.
“It was a challenging year on many fronts,” Goldman chief David Solomon said in a statement announcing the results. “And I am deeply proud of how our people helped clients respond to the economic disruption brought on by the pandemic and the extreme market volatility experienced over the past months.”
That volatility appears to have a boon to Solomon and his team as profits surged more than 150 percent compared to the same time last year.
Solomon’s trading desks and investment bankers powered that growth, with Goldman using a hyperactive Federal Reserve to a 43-percent gain in trading revenue, and a 24-percent jump on the investment banking side thanks in large part to massive underwriting fees on high-profile IPOs like DoorDash and Airbnb.
On a call with analysts, Solomon made it clear that his bank had made the best of an unprecedented year but cautioned that a repeat of 2020 would be bad news for everybody.
After urging political leaders to focus on rescuing the moribund economy by combating the virus and moving together on an efficacious vaccine rollout, Solomon warned “in its absence, the economic recovery will be unnecessarily delayed.”
The call also focused heavily on giving an update on the progress of Solomon’s restructuring of the firm, highlighting Goldman’s increased efficiency and transparency as it reorganizes into four distinct business lines.
Goldman’s overall tone also appeared to include a tacit acknowledgement of its intensifying rivalry with Morgan Stanley. A presentation on the reorganization cited Goldman’s high rankings among its peers across its business lines, showing that it is No. 1 or No. 2 in all of them.
And Solomon did not appear to shy away from sounding competitive.
“We remain the banker of choice for clients around the world,” he told analysts Tuesday.
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