Overview of Goldman Sachs (NYSE: GS) earnings release for the 4th quarter of their 2021 fiscal year
Category: Stock Market and Goldman Sachs (GS)
Date: 19 January 2022 Stock Price of Goldman Sachs (GS): $354.40 Market Capital of Goldman Sachs (GS): $118.7 billion We take a look at the 4th quarter earnings report of their 2021 fiscal year of Goldman Sachs, a financial services provider with $2.470 trillion in assets under management as at end of December 2021. The group reported net revenues of $12.6 billion and net income of $3.94 billion.
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2021 was a record year for Goldman Sachs. The firm’s extraordinary performance is a testament to the strength of our client franchise and people. Moving forward, our leadership team remains committed to growing Goldman Sachs, diversifying our businesses and delivering strong returns for shareholders - David M. Solomon, Chairman and Chief Executive Officer "
About Goldman Sachs
The Goldman Sachs Group, Inc. is a leading global investment banking, securities and investment management firm that provides a wide range of financial services to a substantial and diversified client base that includes corporations, financial institutions, governments and individuals. Founded in 1869, the firm is headquartered in New York and maintains offices in all major financial centers around the world.
Overview of Goldman Sachs' 4th quarter 2021 earnings report
- During the year, the firm generated record net revenues of $59.34 billion, record net earnings of $21.64 billion and record diluted EPS of $59.45, each significantly surpassing the previous record. In addition, ROE1 of 23.0% was the highest since 2007.
- Investment Banking generated record net revenues of $14.88 billion, driven by record net revenues in each of Financial advisory, Equity underwriting and Debt underwriting.
- The firm ranked #1 in worldwide announced and completed mergers and acquisitions, and in worldwide equity and equityrelated offerings, common stock offerings and initial public offerings for the year.
- Global Markets generated net revenues of $22.08 billion, the highest annual net revenues in 12 years, reflecting strength in both Equities and Fixed Income, Currency and Commodities (FICC). Equities produced its second highest net revenues and FICC had record financing net revenues.
- Asset Management generated record net revenues of $14.92 billion, including record net revenues in Equity investments and the second highest net revenues in Lending and debt investments.
- Consumer & Wealth Management generated record net revenues of $7.47 billion, reflecting record net revenues in both Wealth management and Consumer banking.
- Firmwide assets under supervision3,4 increased $325 billion during the year, including record long-term net inflows of $130 billion, to a record $2.47 trillion. Firmwide Management and other fees were a record $7.57 billion in 2021.
- Book value per common share increased by 20.4% during the year to $284.39.
Goldman Sachs management commentary on their 4th quarter 2021 earnings results
NEW YORK, January 18, 2022 – The Goldman Sachs Group, Inc. (NYSE: GS) today reported net revenues of $59.34 billion and net earnings of $21.64 billion for the year ended December 31, 2021. Net revenues were $12.64 billion and net earnings were $3.94 billion for the fourth quarter of 2021. Diluted earnings per common share (EPS) was $59.45 for the year ended December 31, 2021 compared with $24.74 for the year ended December 31, 2020, and was $10.81 for the fourth quarter of 2021 compared with $12.08 for the fourth quarter of 2020 and $14.93 for the third quarter of 2021.
For the year ended December 31, 2020, net provisions for litigation and regulatory proceedings reduced diluted EPS by $9.51. Return on average common shareholders’ equity (ROE)1 was 23.0% for 2021 and annualized ROE was 15.6% for the fourth quarter of 2021. Return on average tangible common shareholders’ equity (ROTE)1 was 24.3% for 2021 and annualized ROTE was 16.4% for the fourth quarter of 2021
“2021 was a record year for Goldman Sachs. The firm’s extraordinary performance is a testament to the strength of our client franchise and people. Moving forward, our leadership team remains committed to growing Goldman Sachs, diversifying our businesses and delivering strong returns for shareholders.” - David M. Solomon, Chairman and Chief Executive Officer
Global Markets
Net revenues in Global Markets were $3.99 billion for the fourth quarter of 2021, 7% lower than the fourth quarter of 2020 and 29% lower than the third quarter of 2021. Net revenues in FICC were $1.86 billion, essentially unchanged compared with the fourth quarter of 2020. Net revenues in FICC intermediation were lower, reflecting significantly lower net revenues in interest rate products and credit products and lower net revenues in commodities and mortgages, partially offset by significantly higher net revenues in currencies. Net revenues in FICC financing were significantly higher, primarily reflecting higher net revenues from mortgage lending. Net revenues in Equities were $2.12 billion, 11% lower than the fourth quarter of 2020, due to significantly lower net revenues in Equities intermediation, across both derivatives and cash products. Net revenues in Equities financing were significantly higher, primarily reflecting increased activity (including higher average client balances)
Asset Management
Net revenues in Asset Management were $2.89 billion for the fourth quarter of 2021, 10% lower than the fourth quarter of 2020 and 27% higher than the third quarter of 2021. The decrease compared with the fourth quarter of 2020 reflected significantly lower net revenues in Equity investments and lower net revenues in Lending and debt investments, partially offset by higher Incentive fees. The decrease in Equity investments net revenues reflected significant net losses from investments in public equities compared with significant net gains in the prior year period, partially offset by significantly higher net gains from investments in private equities. The decrease in Lending and debt investments net revenues reflected lower net gains from investments in debt instruments. The increase in Incentive fees was primarily due to harvesting. Management and other fees were essentially unchanged, reflecting higher average assets under supervision, largely offset by higher fee waivers on money market funds.
Consumer & Wealth Management
Net revenues in Consumer & Wealth Management were $1.97 billion for the fourth quarter of 2021, 19% higher than the fourth quarter of 2020 and 3% lower than the third quarter of 2021. Net revenues in Wealth management were $1.59 billion, 22% higher than the fourth quarter of 2020, due to significantly higher Management and other fees, primarily reflecting the impact of higher average assets under supervision, and higher net revenues in Private banking and lending, primarily reflecting higher loan balances. Net revenues in Consumer banking were $376 million, 8% higher than the fourth quarter of 2020, reflecting higher credit card balances.
Provisions for credit losses
Provision for credit losses was $344 million for the fourth quarter of 2021, compared with $293 million for the fourth quarter of 2020 and $175 million for the third quarter of 2021. The increase compared with the fourth quarter of 2020 primarily reflected growth in credit card balances. The firm’s allowance for credit losses was $4.35 billion as of December 31, 2021.
For the year ended December 31, 2020, net provisions for litigation and regulatory proceedings reduced diluted EPS by $9.51. Return on average common shareholders’ equity (ROE)1 was 23.0% for 2021 and annualized ROE was 15.6% for the fourth quarter of 2021. Return on average tangible common shareholders’ equity (ROTE)1 was 24.3% for 2021 and annualized ROTE was 16.4% for the fourth quarter of 2021
“2021 was a record year for Goldman Sachs. The firm’s extraordinary performance is a testament to the strength of our client franchise and people. Moving forward, our leadership team remains committed to growing Goldman Sachs, diversifying our businesses and delivering strong returns for shareholders.” - David M. Solomon, Chairman and Chief Executive Officer
Global Markets
Net revenues in Global Markets were $3.99 billion for the fourth quarter of 2021, 7% lower than the fourth quarter of 2020 and 29% lower than the third quarter of 2021. Net revenues in FICC were $1.86 billion, essentially unchanged compared with the fourth quarter of 2020. Net revenues in FICC intermediation were lower, reflecting significantly lower net revenues in interest rate products and credit products and lower net revenues in commodities and mortgages, partially offset by significantly higher net revenues in currencies. Net revenues in FICC financing were significantly higher, primarily reflecting higher net revenues from mortgage lending. Net revenues in Equities were $2.12 billion, 11% lower than the fourth quarter of 2020, due to significantly lower net revenues in Equities intermediation, across both derivatives and cash products. Net revenues in Equities financing were significantly higher, primarily reflecting increased activity (including higher average client balances)
Asset Management
Net revenues in Asset Management were $2.89 billion for the fourth quarter of 2021, 10% lower than the fourth quarter of 2020 and 27% higher than the third quarter of 2021. The decrease compared with the fourth quarter of 2020 reflected significantly lower net revenues in Equity investments and lower net revenues in Lending and debt investments, partially offset by higher Incentive fees. The decrease in Equity investments net revenues reflected significant net losses from investments in public equities compared with significant net gains in the prior year period, partially offset by significantly higher net gains from investments in private equities. The decrease in Lending and debt investments net revenues reflected lower net gains from investments in debt instruments. The increase in Incentive fees was primarily due to harvesting. Management and other fees were essentially unchanged, reflecting higher average assets under supervision, largely offset by higher fee waivers on money market funds.
Consumer & Wealth Management
Net revenues in Consumer & Wealth Management were $1.97 billion for the fourth quarter of 2021, 19% higher than the fourth quarter of 2020 and 3% lower than the third quarter of 2021. Net revenues in Wealth management were $1.59 billion, 22% higher than the fourth quarter of 2020, due to significantly higher Management and other fees, primarily reflecting the impact of higher average assets under supervision, and higher net revenues in Private banking and lending, primarily reflecting higher loan balances. Net revenues in Consumer banking were $376 million, 8% higher than the fourth quarter of 2020, reflecting higher credit card balances.
Provisions for credit losses
Provision for credit losses was $344 million for the fourth quarter of 2021, compared with $293 million for the fourth quarter of 2020 and $175 million for the third quarter of 2021. The increase compared with the fourth quarter of 2020 primarily reflected growth in credit card balances. The firm’s allowance for credit losses was $4.35 billion as of December 31, 2021.
Goldman Sachs (GS) stock price chart over the last 5 years
The image below shows the stock price history Goldman Sachs over the last 5 years. Over the last 5 years the stock of Goldman Sachs has increased by 43.9%. Not exactly shooting the lights out but a positive return none the less.
The stock of Goldman Sachs is trading at close to the midpoint between its 52 week low and 52 week high which to us is an indication that the momentum and sentiment of Goldman Sachs is neutral at this point in time.
The stock of Goldman Sachs is trading at close to the midpoint between its 52 week low and 52 week high which to us is an indication that the momentum and sentiment of Goldman Sachs is neutral at this point in time.
Goldman Sachs (GS) vs Citigroup (C) vs JPMorgan Chase (JPM) stock over last 5 years
The image below shows the stock price performance of Goldman Sachs (GS) vs Citigroup (C) vs JPMorgan Chase (JPM) over the last 5 years. While all three are giants in the financial services industry their stock price trends and performance over the last 5 years have been vastly different. The summary below shows the stock price performance of the three firms over the last 5 years, sorted from best to worst performer:
JPMorgan Chase has been by far the best performer over the last 5 years
- JPMorgan Chase (JPM): 71.6%
- Goldman Sachs (GS): 43.9%
- CitiGroup (C): 10.8%
JPMorgan Chase has been by far the best performer over the last 5 years
Goldman Sachs (NYSE: GS) latest stock valuation
So what is Goldman Sachs (GS) stock worth based on their latest earnings report? Based on the earnings reported our valuation model provides a target price for Goldman Sachs at $372 a stock. We therefore believe the stock of Goldman Sachs is undervalued at its current price.
We usually recommend that long term and fundamental investors look to enter a stock at least 10% below our target price, which is $372. We therefore recommend a good entry price into the stock of Goldman Sachs to be at $334.80 or below.
Since the stock of Goldman Sachs is trading at above our suggested entry point into the stock we rate the stock of Goldman Sachs as a hold
We usually recommend that long term and fundamental investors look to enter a stock at least 10% below our target price, which is $372. We therefore recommend a good entry price into the stock of Goldman Sachs to be at $334.80 or below.
Since the stock of Goldman Sachs is trading at above our suggested entry point into the stock we rate the stock of Goldman Sachs as a hold
Next earnings release date for Goldman Sachs
It is expected that Goldman Sachs (GS) 1st quarter 2022 earnings report will be released in the middle of JApril 2022