The pandemic recession has caused blockages for most of the country’s largest banks. Not so for Goldman Sachs Group Inc.
GS 5.40%
The Wall Street giant’s share price closed at a record for the first time in nearly three years, a testament to how much the bank has benefited from last year’s financial chaos. Its shares have risen about 19% over the past month, far more than any of its five major banks.
Goldman’s shares had been static for years, a perpetual concern for chief executive David Solomon and that led him to reclaim some of the bank’s famous secrets a year ago. At that time, his commercial business collapsed amid efforts to build a consumer bank and grow his wealth management business.
The pandemic set aside many of these challenges. He boosted roller coaster markets that raised his traditional business of sales and trade. Then, as the markets retreated, their bankers made money by helping corporate customers sell debt and equity.
The investment banking business probably remained strong for the last three months of the year. Jefferies Financial Group Inc.
said Monday through late Monday that its investment banking revenue hit a record in the fourth quarter, which analysts see as a favorable sign for larger competitors like Goldman.
Shares of the bank, which reported profits at the end of the month, rose 5.4%, or $ 14.62, on Wednesday, surpassing the 2018 high. The prospect of rising interest rates after the election elections in the Senate of Georgia drove the broad-based banking actions. bank of america Corp.
jumped 6.3% and Wells Fargo & Co. increased by 7.1%. Morgan Stanley added 6% and JPMorgan Chase & Co. rose 4.7%.
Unlike JPMorgan and Bank of America, Goldman does not have a large consumer bank. This slowed its share price during a concentration of bank shares in 2019, when healthy U.S. consumers helped boost megabankings to big profits.
But the coronavirus recession turned that obligation into strong consumer exposure, forcing banks to set aside tens of billions of dollars to prepare for possible loan losses. JPMorgan, the largest bank in the U.S. by assets, was about 6.8% below its record at Tuesday’s market close. Goldman’s shares, meanwhile, outperformed most of its peers in 2020 and 2021.
Other factors have also raised the price of Goldman shares: the bank entered into a multimillion-dollar deal with the Justice Department in October, closing the door to a long-running probe into its work for a well-known Malaysian government fund as 1MDB.
Billions of dollars missing from Malaysia’s 1MDB have become one of the biggest financial scandals in history, with Goldman Sachs agreeing to pay the U.S. government more for its stake than after the 2008 crisis .The following explains how the alleged fraud occurred and was undone. Composite photo: Adam Falk (originally published on October 20, 2020)
In December, the Federal Reserve relaxed pandemic restrictions on share repurchases. Redemptions can raise the price of a company’s shares by taking shares out of the market and making profits look stronger per share.
Banks will be able to return capital in the first quarter, but cannot exceed their average quarterly profits over the past year. This can benefit Goldman, above all, because of its strong profitability.
Write to Ben Eisen to [email protected]
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