Well, it’s a start for Goldman Sachs, anyway.
After eight straight quarters of declining earnings, the investment banking giant reported fourth-quarter net earnings of $2 billion, a 51% year over year boost, as a strategic shift is showing signs of success. The bank’s profit bump was driven by growth in asset and wealth management. Revenues climbed 23% YoY and 36% from Q3in those categories, while revenues dropped in the bank’s traditional investment and trading segments.
“We made significant progress this year in narrowing our strategic focus,” CFO Denis Coleman said on an earnings call.
The bank is moving away from its traditional strengths of investment banking and stock trading toward asset and wealth management. Chairman and CEO David Solomon said his firm predicts the latter segments will be even more lucrative moving forward.
“This is a scaled business with over $2.8 trillion in assets under supervision and where we see significant opportunity for further growth,” Solomon said on the earnings call.
As part of the bank’s new strategy, Goldman Sachs “made several important decisions and swiftly executed on them,” Solomon said. Notably, the firm exited its Marcus consumer lending business and sold most of its Marcus loan portfolio, sold its personal financial management business, announced the sale of GreenSky and most of its associated loan portfolio, and is severing its credit card partnership with General Motors.
“I firmly believe companies should innovate and seek out new opportunities for growth,” Solomon said. “But it is also important to be nimble and make tough decisions when needed.”
It’s not all good news for Goldman. Although earnings were up, profits for the year declined 24%.
And Solomon doesn’t have forever to execute the new strategy. The challenge for Goldman Sachs is to continue this momentum into future quarters to show its shift in strategy is viable, according to the Wall Street Journal, which previously reported that Solomon has “come under fire” from Goldman Sachs partners.
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