NEW YORK, Jan 16 —- Goldman Sachs beat Wall Street estimates and earned its biggest quarterly profit in more than three years as its investment bankers brought in more deal fees, while its traders benefited from active markets.

Shares rose 5.5 per cent in Wednesday morning trading as profit climbed to US$4.11 billion (RM18.5 billion), or US$11.95 per diluted share, for the fourth quarter ended December 31, compared with US$2.01 billion, or US$5.48 per diluted share, a year ago.

Its EPS beat the US$8.22 expected by analysts, according to estimates compiled by LSEG.

Banking industry executives anticipate better conditions for deals this year as the US Federal Reserve cuts interest rates and President-elect Donald Trump’s pro-business comments fuel optimism among investors.

"There has been a meaningful shift in CEO confidence, particularly following the results of the US election,” CEO David Solomon told analysts on an earnings call. "Additionally, there is a significant backlog from sponsors and an overall increased appetite for dealmaking, supported by an improving regulatory backdrop.”

Goldman’s investment-banking fees rose 24 per cent to US$2.05 billion in the fourth quarter, powered by debt underwriting that benefited from strong leveraged finance and corporate bond sales.

An industry-wide recovery in mergers and acquisitions, along with renewed activity in equity and debt markets, lifted results in the second half of 2024 for Wall Street’s top banks.

"We have been bullish on GS stock because we think the market is not fully incorporating the upside potential of a strong M&A cycle,” Chris Kotowski, a banking analyst at Oppenheimer & Co, wrote in a note.

Equity and debt underwriting revenue jumped 98 per cent and 51 per cent, respectively, in the fourth quarter, helped by secondary and initial public offerings, private placements and leveraged finance activity.

Goldman Sachs’ advisory revenue declined by 4 per cent for the quarter, but rose for 2024, owing to a rise in completed deals, the bank said.

Across the global industry, investment-banking revenue increased 26 per cent to US$86.8 billion in 2024, with North America surging 33 per cent from a year ago, according to data from Dealogic. Goldman earned the second-highest revenue across banks globally.

Brisk dealmaking

Last month, Solomon told a Reuters conference that dealmaking in equities and mergers and acquisitions could exceed 10-year averages in 2025.

Revenue in Goldman’s asset and wealth management arm climbed 8 per cent to US$4.72 billion, while revenue at its global banking and markets division increased by 33 per cent to US$8.48 billion in the fourth quarter.

Equity traders at the bank continued to ride a broader stock market rally in the final three months of 2024, with revenue surging 32 per cent to US$3.45 billion. It posted record net annual revenue in equities.

Stocks in the US have blown through record highs, fuelled by optimism about the new administration’s economic policies, combined with lower interest rates.

Fixed income, currency and commodities trading also shone with a 35 per cent jump in revenue.

Goldman announced a raft of leadership changes on Monday as it created a division to focus on financing large deals and providing loans to corporate clients, looking to capitalise on the lucrative private credit market.

Meanwhile, the bank is still slimming down its ill-fated consumer operations after losing billions of dollars. Solomon, who once championed the retail push, has drawn criticism for the strategy.

Goldman’s credit-card partnership with Apple may end before its contract runs out in 2030, Solomon said.

"We have a contract with Apple to run that partnership until 2030, although there’s some possibility that it won’t continue until that time frame,” he told analysts.

The business is housed within Goldman’s platform solutions unit, which posted an US$859-million annual net loss in 2024.

Goldman’s provisions for credit losses stood at US$351 million for the fourth quarter, down from US$577 million a year ago, mainly due to potential losses in its credit-card portfolio.

Revenue for platform solutions, the unit that houses some of Goldman’s consumer operations, climbed 16 per cent to US$669 million.

Goldman shares ended 2024 with a 48.4 per cent surge, the biggest rise among the six biggest US lenders, and handily surpassed the market benchmark.

Rival JPMorgan Chase posted record annual profit, while Wells Fargo’s WFC.N profit also climbed due to a rebound in dealmaking.

For 2024, Goldman earned a profit of US$40.54 per share versus US$22.87 a year earlier. The bank’s overall revenue rose 16 per cent to US$53.51 billion.

It ended 2024 with a global workforce of 46,500, up 3 per cent from a year ago. Compensation and benefits rose 4 per cent in the fourth-quarter from a year earlier. — Reuters