In this Dec. 13, 2016, file photo, the logo for Goldman Sachs appears above a trading post on the floor of the New York Stock Exchange. Goldman Sachs said its profits more than doubled from a year earlier thanks to a surge in both trading and advising revenue. (AP Photo/Richard Drew, File)
NEW YORK (AP) — Goldman Sachs said its profits more than doubled from a year earlier thanks to a surge in both trading and advising revenue.
The New York-based investment bank said it earned a profit of $4.36 billion, or $12.08 per share, up from a profit of $1.72 billion, or $4.69 a share, in the same period a year earlier. The earnings were significantly better than the $7.45-per-share profit that analysts were expecting.
Goldman's results reflect that Wall Street had a strong year, despite the pandemic and millions of Americans out of work. After plunging sharply in March and April, the stock market went basically straight up for seven months as investors tried to look beyond the near-term death and pain and focus on where the U.S. economy will be in a year or two years' time.
Goldman’s profits were driven higher by its investment bank and trading desks, the cornerstone to the bank’s business models. Investment banking revenue was up 29% from a year earlier to $2.73 billion. The bank saw higher underwriting revenues — fees the bank collects to take companies public or underwrite debt they want to offer — as well as trading revenue, which rose 23% from a year earlier.
The banks also saw revenue gains in its wealth management arm as well is nascent consumer banking business, which focuses on consumer loans, savings accounts as well as handling the underwriting for Apple’s credit card. Like its competitors, Goldman also moved some of the money it had set aside to cover credit losses out of its reserves. However Goldman’s exposure through consumer and business loans is significantly smaller than commercial banks like Citigroup, JPMorgan Chase and Wells Fargo so it wasn’t a significant part of its overall results.
The stellar quarter also will result in stellar bonuses for Goldman’s well-compensated employees. The bank set aside $13.31 billion to pay out bonuses and payroll this year, up 8% from a year earlier. Most of Goldman’s top employees make most of their money in year-end bonuses.
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It’s rough in the markets right now. Underlying the volatility is uncertainty. The VIX Index (INDEXCBOE: VIX) otherwise known as the Fear Index is unofficial, but an eerily accurate predictor of market sentiment. And the VIX is up 30% in the last month.
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The answer is all of the above and then some. But does that mean you should stay out of equities? I don’t think so. Where are you going to go? The Fed has promised interest rates are going nowhere fast. And that bit of news is weighing down the bond market.
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The pandemic brought the entire market down. But once investors took a breath they found bargains. And if you had the courage to put your money to work in those stocks, you’ve been rewarded.
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View the "7 Stocks That Could Provide a Year-End Rally".