Goldman Sachs earnings Q4 2018

Goldman Sachs shares advanced after posting fourth-quarter profit and revenue that exceeded analysts’ expectations on strength in the firm’s investment banking and investing and lending divisions.

The New York-based bank generated $6.04 per share in profit for the fourth quarter of 2018, versus the $4.45 estimate of analysts surveyed by Refinitiv. Revenue of $8.08 billion also beat analyst’s estimate of $7.55 billion.

The bank posted $2.04 billion in revenue in its investment banking division, better than then $1.88 billion estimate, fueled by a 56 percent surge in advisory revenue to $1.20 billion. The lion’s share of Goldman’s revenue beat appeared to come from the bank’s investing and lending division, which produced $1.91 billion in revenue, more than $500 million in excess of the $1.35 billion estimate. The bank cited “significantly higher net interest income” from a year earlier in that business.

The bank’s shares rose 2.8 percent to $184.95 in premarket trading.

Here’s what Wall Street expected:

  • Earnings: $4.45 per share, a decline from a year ago, according to Refinitiv.
  • Revenue: $7.55 billion, a decline of 3.6 percent from a year earlier.
  • Trading Revenue: Equities: $1.64 billion, Fixed income: $992 million, according to FactSet
  • Investing Banking: $1.89 billion

Goldman Sachs CEO David Solomon, who took over from Lloyd Blankfein on October 1, is expected to address analysts on an earnings call for the first time Wednesday.

He’ll have a lot to discuss: Goldman shares dropped 34 percent last year, the worst performance among the six biggest banks.

Much of that decline happened after the U.S. Justice Department unsealed the Nov. 1 guilty plea of an ex-Goldman banker who helped a Malaysian financier loot an investment fund of billions of dollars. That announcement sparked a series of bad news related to the fund, 1MDB, including criminal charges filed by Malaysia and questions about the ultimate liability faced by the bank.

Analysts want to know the extent of costs to resolve 1MDB probes and whether or not the negative attention impacted business operations, according to Jason Goldberg of Barclays.

Furthermore, the market turbulence that pummelled bank stocks late last year also crimped trading and bond and stock underwriting desks, a development that could impact Goldman more than peers because its Wall Street operations make a bigger part of its revenue. Citigroup and J.P. Morgan were both impacted by declines in bond trading revenue of 21 percent and 16 percent, respectively.

In October, CFO Stephen Scherr said the firm was undertaking a “front-to-back” review of Goldman’s four main divisions to boost shareholder returns. So investors will want to hear if there are any early results from that effort, as well as guidance on 2019 targets and progress on a previously-disclosed $5 billion revenue project.

The New York-based investment bank is attempting to push into retail banking for the first time in its 150 year history, and investors will want an update on that effort as well.