Goldman Beats, Profits Surge As Trading Revenues Jump; Average Banker Comp Hits $338,600

Unlike the other big banks, Goldman's earnings release is a breeze: since the bank has virtually no balance sheet to use as a source of income (or loss), it is all about the income statement. And it was here that for yet another quarter, Goldman surprised to the upside, reporting Q4 Revenues of $8.17BN, higher than the $7.76BN estimated, translating to EPS of $5.08, also above the $4.73 estimate, and nearly 4 times the $1.27 reported a year ago.

Like other banks, Goldman benefited from a big pick-up in trading activity during the period, as investors reset portfolios in anticipation of an interest-rate increase from the US Federal Reserve, and as the election of Donald Trump spurred big bets on stocks that stood to benefit.  Net revenues from the institutional client services division were up 25% from a year earlier to $3.6bn, led by a 78% jump in revenues from the fixed-income, currencies and commodities unit.

“After a challenging first half, the firm performed well for the remainder of the year as the operating environment improved,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “We continued to manage our expenses carefully and we enter the new year with industry leading positions across our businesses, as well as strong capital and liquidity."

Broken down by key operating group, most segments reported numbers that beat expectations with the exception of Equities sales and trading, which came in at $1.59BN, fractionally below the $1.61BN expected.

Other segments performed better in Q4:

  • FICC sales & trading revenue was $2.00bn, well above the estimate of $1.59bn
  • Investment banking revenue of $1.49bn beating estimates of $1.47bn.
  • Investment and Lending, formerly known as prop, reported $1.48bn in revenue, higher than a year ago.
  • OVerall trading revenue of $3.60billion was also better than the estiamte $3.28b.

The full breakdown of Goldman's various revenue segments is shown in the chart below:

Other metrics:

  • 4Q return on avg. equity 11.4%
  • 4Q Basel III common equity Tier 1 ratio 13.1%
  • Assets under management $1.38t

 

In a notable variance from the other banks, Goldman's Q4 compensation expenses, while declining from $3.2 billion to $2.45 billion, came in modestly higher than the expected $2.31 billion, as Lloyd Blankfein decided to reward his team for a job well done. Or the team that's left at least: total Goldman staff decreased 7% during 2016, with the firm closing the year with 34,400 workers. As the following chart shows, the average accrued banker compensation rose to $338,576, the highest since Q4 of last year.