Goldman Sachs reported mixed fourth-quarter results on Thursday, but there was plenty for investors to like, and shares rose more than 4%. Revenue in the third quarter ended Dec. 31 fell 3% year over year to $13.45 billion, missing the consensus estimate of $13.79 billion, compiled by data provider LSEG. Earnings per share (EPS) increased 17.2% year over year to $14.01, well ahead of the $11.68 estimate, according to LSEG. GS 1Y mountain Goldman Sachs 1-year return Bottom line It wasn’t the cleanest quarter, with Goldman reporting its first revenue miss since April 2023. It was also a noisy report, given that the bank divested its Apple credit card business during the reported quarter, resulting in a significant revenue hit to its platform solutions unit, which was more than offset by the release of reserves tied to provisions for credit losses. Using these previously set-aside funds for loan defaults — assuming fewer loans are expected to default — boosts earnings. The bank’s other two segments, global banking and markets, and asset and wealth management, generated better-than-expected revenue. Overall return on tangible common equity came in well above expectations, up 160 basis points year over year. Net interest income was also strong, and the firm’s Common Equity Tier 1 (CET1) ratio is well above the required minimum, indicating ample capacity to invest in growth and return cash to shareholders. The CET1 ratio measures a bank’s financial strength, calculated by dividing its highest-quality capital (common stock, retained earnings) by its total risk-weighted assets (RWAs). The higher the ratio, the greater stability. The required minimum for banks varies based on scale and importance to the financial system, but for Goldman the minumum ratio is 10.9%. We see the move away from the Apple credit card as an opportunity to focus on Goldman’s core businesses. On the call, CEO David Solomon said he expects the company’s investment banking activity to accelerate, driven by several catalysts, including “tremendous public and private capital fueling growth in AI, as well as a strong pickup in sponsor activity.” Why we own it Goldman Sachs is our bet on a rebound in dealmaking as the regulatory environment improves under President Donald Trump. Investment banking is a significant part of Goldman Sachs. Initiation date: Dec. 19, 2024 Most recent buy: March 19, 2025 Competitors: Morgan Stanley , JPMorgan , Bank of America , and Citigroup Solomon added that the firm’s investment banking backlog stands at its highest level in four years, which should help the rest of Goldman’s businesses. “M & A transactions often kick off a flywheel of activity across our entire franchise,” Solomon explained. “Whether it’s acquisition, financing, hedging activity, secondary market making, or investing opportunities for AUM clients. It is unquestionable that there is a significant multiplier effect. And as the number one advisor for over two decades, we are…
Read More: We’re raising our price target on Goldman Sachs after strong, noisy Q4
