Goldman Sachs Group reported better-than-expected earnings and revenues in the fourth quarter, driven by strong performance in its investment banking and global markets divisions. However, shares of the banking giant slipped 2.3% on Tuesday.
Goldman Sachs’ (GS) 4Q earnings more than doubled to $12.08 per share from $4.69 per share in the year-ago period, surpassing analysts’ expectations of $7.47 per share. Total revenue jumped 18% to $11.74 billion during the same period and came ahead of the Street’s estimates of $9.99 billion.
The bank’s top-line growth was fueled by a 27% growth in investment banking revenues. Meanwhile, global markets revenue grew 23% year-over-year. The bank’s asset management revenue grew 7% year-over-year, while the consumer & wealth management business posted revenue growth of 17% on a year-over-year basis.
In 4Q, net interest income increased 32% to $1.4 billion, while the provision for credit losses declined 13% to $293 million, due to reserve reduction on wholesale loans. As of Dec. 31, 2020, loans increased 6.4% to $116 billion, while deposits rose 36.8% to $260 billion. (See GS stock analysis on TipRanks)
Following the earnings release, Oppenheimer analyst Chris Kotowski raised the stock’s price target to $445 (51.3% upside potential) from $407 and maintained a Buy rating.
The analyst said, “Goldman has multiple levers to boost ROE [return on equity] over time (buybacks, shrink equity investments, costs, interest, payments revenues); shares are very attractive at only 1.3x TBV [tangible book value].”
Kotowski added, “Goldman is less at risk than peers of significant COVID-19- related loan losses and is well poised to take advantage of heightened activity in global capital markets.”
Overall, the rest of the Street is cautiously optimistic on the stock. The Moderate Buy analyst consensus shows 8 Buys, 2 Holds and 1 Sell. The average price target of $315.80 implies upside potential of about 7.3% to current levels. Shares have gained 20.8% over the past year.