Investment bank Goldman Sachs (GS - Free Goldman Sachs Stock Report) reported fourth-quarter revenue and share-net results that were slightly below our estimates, but nonetheless showed year-over-year improvement.
Earnings per share of $5.08 was slightly below our estimate of $5.20, but up solidly from the $4.68 figure in the prior-year period. Meanwhile, revenues of $10.258 were a strong improvement over the $8.721 billion sum in the fourth quarter of 2015.
Indeed, after a challenging first half of 2016, the company saw a steadily improving operating environment as the year came to a close. The Institutional Client Services division saw a 25% year-over-year increase in revenues, as fixed income, currency, and commodities client execution activity was 78% higher compared with the previous-year period. This was driven by significant increases in credit products and interest rate products. Too, the Investing & Lending segment saw a 15% year-over-year revenue increase, driven by growth in debt securities and loans, net interest income, and net gains from investments.
While GS shares were basically unchanged upon release of the results, they have surged in price since the U.S. election last November. The surprisingly strong result for Republicans has led to speculation that the incoming Trump Administration will have a more relaxed approach to financial regulation than the outgoing one. This is particularly important to Goldman, as the company's outlook had been clouded by regulatory changes such as the Volcker rule, a set of regulations meant to limit proprietary trading. The rule may be enforced loosely in the coming years, and may even be legislatively repealed. There have also been indications that funding and leverage rules on banks may be relaxed by the new administration.
We expect Goldman to see solid revenue and earnings growth in 2017. We estimate that the company will achieve revenues of about $43 billion, while earnings-per-share are expected to reach $19.95.
About The Company: The Goldman Sachs Group is a global investment banking and securities firm. It operates in four business segments: Investment Banking (21% of 2015 revenues); Institutional Client Services (45%); Investing & Lending (16%); and Investment Management (18%). In 2015, 44% of the company’s revenues came from outside of the Americas. - Adam James Platt
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.
