Goldman Sachs (NYSE:GS) reported its Q4 2023 earnings, revealing a strategically crafted path for the company. Chairman and CEO David Solomon reflected on the year as “a year of execution” as the firm continues to realign its focus away from consumer finance.

Asset and Wealth Management Performance

Amidst this restructuring, the Asset & Wealth Management segment exhibited noteworthy improvement, primarily driven by significant gains in equity and debt investments alongside increased management and other fees.

Global Banking & Markets experienced a reduction in revenue from investment banking, in line with an industry-wide decrease in mergers and acquisition volume. Notably, revenue from equity underwriting, predominantly from secondary offerings, witnessed a year-on-year increase.

Financial Highlights

The Q4 GAAP EPS of $5.48 marginally surpassed the prior quarter, with the figure exceeding the consensus expectation of $3.93 and marking a considerable uptick from $3.32 in Q4 2022. Notably, excluding specific items related to the company’s restructuring and FDCI special assessment, the Q4 2023 earnings totaled $6.31 per share.

While the total net revenue of $11.3B outperformed the consensus estimate of $11.0B, it lagged behind the prior quarter’s $11.8B but showed growth from $10.6B a year ago.

Operational Performance

The net interest income for Q4 amounted to $1.34B, falling below the Visible Alpha consensus of $1.66B. Notably, this marked a decline from $1.55B in the previous quarter and $2.07B a year ago, reflecting a shift in the company’s interest income dynamics.

The provision for credit losses stood at $577M, a notable increase from $7M in Q3 and $972M in Q4 2022, indicative of the ebb and flow in credit risk management.

Operational Expenses and Financial Position

Total operating expenses amounting to $8.49B saw a 6% decline from the previous quarter and rose 5% from Q4 2022. Notably, compensation and benefits expenses reflected a substantial decrease of 14% quarter-on-quarter and 4% year-on-year.

Goldman Sachs also reported an increase in loans to $183B at the end of December 2023 from $178B at the end of September, with deposits growing to $428B from $403B at the end of September. Additionally, the headcount witnessed a decrease to 45,300 from 45,900 in the previous quarter and 48,500 at the end of December 2022.

Segment-wise Revenue Breakdown

Within the Global Banking & Markets segment, net revenue of $6.35B represented a 21% decline from the previous quarter and a 3% decrease year-on-year. Specifically, investment banking fees saw a 12% drop year-on-year, while FICC revenue slid by 24% year-on-year. In contrast, equities revenue witnessed a substantial 26% increase year-on-year.

On the other hand, the Asset & Wealth Management segment reported net revenue of $4.39B, marking a 36% increase quarter-on-quarter and a notable 23% rise year-on-year. Management and other fees within this segment totaled $2.45B, reflecting a 2% increase quarter-on-quarter and a 9% rise year-on-year. Platform Solutions net revenue remained steady quarter-on-quarter at $577M and exhibited a 12% increase year-on-year.

The earnings release was accompanied by a conference call scheduled for 9:30 AM ET, signifying a pivotal moment for the company to provide deeper insights into its strategic direction and financial performance.