The pandemic recession has caused blockages for most of the nation’s largest banks. Not so for Goldman Sachs Group Inc.
GS 5.40%
The price of the Wall Street giant’s share closed at a record for the first time in almost three years, a sign of how much the bank benefited from last year’s financial chaos. Its shares have risen by about 19% in the last month, much more than any of the big bank’s five partners.
Goldman’s shares have been static for years, a perpetual concern for CEO David Solomon and one that led him to withdraw some of the bank’s famous secret a year ago. At the time, his trading business was dominated by efforts to build a consumer bank and grow his wealth management business.
The pandemic has removed many of these challenges. It has stimulated the roller-coaster markets that have raised their traditional sales and trading activities. Then, as the markets rebounded, bankers made money helping corporate customers sell debt and equity.
Investment banking is likely to remain strong in the last three months of the year. Jefferies Financial Group Inc.
it said late Monday that its bank earnings on investment hit a record in the fourth quarter, which analysts see as a favorable sign for larger competitors such as Goldman.
Shares of the bank, which reports gains later in the month, rose 5.4% or $ 14.62 on Wednesday, surpassing the 2018 high. The prospect of rising interest rates after the Georgia Senate election generally pushed bank shares. Bank of America Body.
increased by 6.3% and Wells Fargo & Co. increased by 7.1%. Morgan Stanley added 6%, and JPMorgan Chase & Co. rose by 4.7%.
Unlike JPMorgan and Bank of America, Goldman does not have a large consumer bank. This held back its share price during a 2019 banking rally, when healthy US consumers helped push mega-banks to big profits.
But the coronavirus recession has made heavy consumer exposure a debt, forcing banks to allocate tens of billions of dollars to prepare for potential loan losses. JPMorgan, the largest bank in the US by assets, was about 6.8% below its record at Tuesday’s market close. Meanwhile, Goldman’s shares outperformed most of its peers in 2020 and 2021.
Other factors also raised the price of Goldman shares: the bank entered into a multi-billion dollar deal with the Justice Department in October, closing the door to a long-running probe into a corrupt Malaysian government fund known as 1MDB.
The billions of dollars that have disappeared from Malaysia’s 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. apart. Composite photo: Adam Falk (originally published October 20, 2020)
In December, the Federal Reserve relaxed its pandemic restrictions on share buybacks. Redemptions can raise a company’s share price by withdrawing shares from the market and increasing earnings per share.
Banks will be able to repay capital in the first quarter, but cannot exceed their average quarterly profit in the last year. This can benefit Goldman, in particular, due to its strong profitability.
Write to Ben Eisen at [email protected]
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