Goldman Sachs posted a 24% rise in investment banking fees in the fourth quarter from a year earlier as revenue from equity capital markets doubled, and backed it up with a near one-third rise in trading revenues for equities and fixed income.

One less rosy area in the quarter, however, was M&A advisory, traditionally the bank's strongest area. Goldman reported a 4% dip in revenues to US$960m – leaving it trailing rival JP Morgan, whose M&A fees jumped 41% to US$1.06bn.

But all other areas at Goldman had a strong end to the year. Revenues from ECM in the three months to the end of December were US$499m, up 98% from a year earlier thanks to a pick-up in secondary offerings, IPOs and private placements. Debt capital markets revenues were US$595m, up 51%, driven by leveraged finance activity.

That lifted investment banking revenues for the quarter to US$2.05bn, up 24% from US$1.65bn a year earlier.

JP Morgan and Citigroup also reported strong results on Wednesday, giving a fresh boost to US bank stocks. Goldman shares jumped 5% to US$601 after hitting US$609 in early trading, not far from their all-time high of US$612.50 in November.

Goldman said its investment banking fees pipeline at the end of December was also stronger than at the end of September, and CEO David Solomon was bullish on prospects for dealmaking in 2025 following a relatively subdued two years for M&A and IPO activity.

"It’s certainly setting up to be much more constructive and robust," he told analysts on a conference call. “At the moment for our business mix, particularly around capital markets activity, it feels like we’ve got a tailwind going into 2025 and I think levels that have been below historical averages are at a minimum going to normalise and maybe do better.

“While no one has a crystal ball there are a number of catalysts that we believe will continue to drive activity," Solomon said. "There has been a meaningful shift in CEO confidence, particularly following the result of the US election. Additionally, there’s a significant backlog for [financial] sponsors and an increased appetite for dealmaking, supported by an improving regulatory backdrop. The combination of these conditions should spur further activity in 2025.” 

Trading surge

Trading activity also got a boost from the volatility around the US presidential election in November. Goldman's equities trading revenue in October-December hit US$3.45bn, up 32% from a year earlier, which the bank said was primarily driven by cash products, and in equities financing thanks to prime and portfolio financing.

That helped seal a record year for the bank in equities trading, with full-year revenues of US$13.43bn, up 16% from 2023.

Revenues from fixed-income, currency and commodities trading in Q4 were US$2.74bn, up 35% from a year earlier. The bank said that was due to significantly higher revenues in currencies and mortgages and an increase in credit products, partially offset by lower income from commodities.

Net revenues in Q4 for the global banking and markets division were US$8.48bn, up 33% from a year earlier and helping swell overall revenues to US$13.87bn, up 23% on the year. Net earnings were US$3.92bn, more than double its US$1.87bn profit a year earlier.

The strong fourth quarter sealed a solid if unspectacular year, as M&A and IPO activity remained relatively subdued.

Goldman’s net revenues for 2024 were US$53.51bn, up 16% from 2023, and it delivered net earnings of US$13.53bn, up 71%. Its return on tangible equity for the year was 13.5%, helped by an RoTE of 15.5% in Q4. Solomon said the bank had met or exceeded almost all of its strategic targets set five years ago, and improved the durability of revenues.

Source: IFR