The recession of the pandemic has caused roadblocks for most of the largest banks in the country. Not so for Goldman Sachs Group Inc.
GS 5.40%
The Wall Street giant’s share price closed at a record high for the first time in almost three years, a sign of how much the bank has benefited from the financial chaos of the past year. The stock has risen about 19% in the past month, far more than any of its five major bank counterparts.
Goldman shares have been static for years, a perpetual concern for CEO David Solomon, and led to his withdrawal from the bank’s famous secrecy a year ago. At the time, his trading business was declining amid efforts to build a consumer bank and grow his wealth management business.
The pandemic has set aside many of the challenges. This spurred rolling mill markets that lifted its traditional sales and trading industry. When markets bounce back, bankers earn money to help corporate clients sell debt and equity.
The investment banking industry has probably remained strong in the last three months of the year. Jefferies Financial Group Inc.
said late Monday that its investment from investment banking services hit a record high in the fourth quarter, which analysts see as a favorable sign for bigger competitors like Goldman.
Shares of the bank, which reported earnings later in the month, rose 5.4%, or $ 14.62, on Wednesday, peaking above the 2018 high. The prospect of rising interest rates after the Senate elections in Georgia has broadly boosted bank shares. Bank of America Corp.
jumped 6.3% and Wells Fargo & Co. increased by 7.1%. Morgan Stanley added 6% and JPMorgan Chase & Co. it rose by 4.7%.
Unlike JPMorgan and Bank of America, Goldman does not have a large consumer bank. It held back its share price during a march in banking stocks in 2019, when healthy US consumers helped push the mega-banks to huge profits.
But the resonance of the coronavirus has led to serious exposure to consumers being an obligation, forcing banks to set aside tens of billions of dollars to prepare for possible loan losses. JPMorgan, the largest bank in America by assets, was about 6.8% lower than its record at the close on Tuesday. Goldman’s share outperformed most of its peers in 2020 and 2021.
Other factors also boosted Goldman’s share price: the bank entered into a multi-billion dollar settlement with the Justice Department in October, closing the door on a lengthy investigation into its work for a corrupt Malaysian government fund known as 1MDB.
Billions of dollars missing in Malaysia in 1MDB have become one of the biggest financial scandals ever, with Goldman Sachs agreeing to pay the US government more for its involvement than after the 2008 crisis. Here’s how the alleged fraud took place and then fell apart. Photo composition: Adam Falk (Originally published on October 20, 2020)
In December, the Federal Reserve relaxed its restrictions on pandemic on share buybacks. Repurchases can increase a company’s share price by pulling shares out of the market and making earnings per share appear.
Banks will be able to raise capital in the first quarter, but this may not exceed their average quarterly profit over the past year. This could particularly benefit Goldman due to its strong profitability.
Write to Ben Eisen by [email protected]
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