Goldman Sachs reported a robust 51% increase in profits compared to the previous year, attributed to strong market returns in the final quarter of 2023. Despite this positive end to the year, the renowned investment bank faced challenges throughout 2023, concluding with a nearly one-third decline in profits compared to 2022. The bank underwent a restructuring initiative, writing off its consumer banking franchise and implementing layoffs as part of what it termed a turnaround year.
In the last three months of 2023, Goldman Sachs achieved a profit of $2 billion, a notable rise from the $1.33 billion recorded in the same period the previous year. The per-share earnings of $5.48 surpassed analysts’ expectations. While the trading and investment management divisions showed modest improvements, investment banking and advising revenues experienced declines. The reduced number of significant deals in 2023, attributed to the high cost of financing, impacted the bank’s overall performance in these areas.
A substantial boost to Goldman’s results came from an $838 million gain in investments in other companies, reflecting the positive market performance at the end of 2023. However, for the entire year, Goldman faced challenges, witnessing a 16% drop in investment banking fees and an 18% decline in commodities, currencies, and fixed-income trading. The decision to wind down the Marcus consumer banking division and potential plans to sell its credit card division were indicative of the bank’s strategic shifts.
Goldman Sachs struggled to maintain its return on common equity, a key metric for investment banks, posting a figure of 7.5% for the year, below the preferred threshold of 10%. The bank addressed its financial challenges by reducing its workforce by 7% and moderately increasing the funds allocated for compensation and benefits, signaling potentially more moderate bonuses for employees accustomed to year-end performance packages.
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