Goldman Sachs profits jump 51% but full year reflects difficult period for bank

Goldman Sachs’ profits in the last quarter rose 51% compared with a year earlier, the US investment bank said on Tuesday, helped by strong returns in the overall market.

However it closed out a difficult 2023 with overall profits down nearly a third from 2022, as the bank wrote off its consumer banking franchise and laid off employees in what the bank has called a turnaround year.

Goldman Sachs posted a profit of 2 billion US dollars (£1.57 billion) in the last three months of the year, up from 1.33 billion dollars (£1.05 billion) in the same period a year earlier.

On a per-share basis, Goldman earned 5.48 dollars (£4.30) per share, beating analysts’ expectations.

The bank saw modest improvements in its trading and investment management divisions, but saw declines in its important investment banking and advising revenues.

A number of companies held off doing any big deals in 2023, due to the high cost of financing, which means Goldman and other investment banks had fewer deals to put together.

The biggest boost to Goldman’s results came in a 838 million dollar (£658 million) gain in the investments the bank had placed in other companies, a reflection of how well the market did in the last three months of 2023.

But for the full year, Goldman struggled.

Investment banking fees were down 16% from 2022, and trading in commodities, currencies and fixed income was down 18%.

Goldman announced last year that it was going wind down its Marcus consumer banking division, and there are reports that it wants to sell off its credit card division.

The bank’s return on common equity – a measure used by investment banks to show well they perform with their underlying assets – was 7.5% last year. Typically Goldman and other banks like to have that figure above 10%.

The bank cut 7% of its workforce last year, and the money it set aside for compensation and benefits this year was up a modest 2%, likely to signal more moderate bonuses for Goldman employees who largely get their compensation in the form of year-end performance packages.