Goldman Sachs (GS) shifted its focus from investments to lending as the firm posted $1.8 billion in lending revenue in 2012, up from less than $100 million a year earlier, according to the investment bank’s quarterly and yearly earnings report.
Specifically, fixed income, currency and commodities client execution generated net revenues of $9.91 billion including solid results in mortgages, sturdy results in credit products as well as interest rate products. This is up 50% from a year ago.
Goldman Sachs ranked first globally in equity and equity-related offerings as well as common stock offerings for the year, reporting net revenues of $34.16 billion and net earnings of $7.48 billion for 2012.
"While economic conditions remained challenging for much of last year, the strengths of our business model and client franchise, coupled with our focus on disciplined management, delivered solid performance for our shareholders," said Lloyd Blankfein, chairman and chief executive officer at Goldman Sachs.
He added, "The firm’s strategic position provides a solid basis on which to grow and generate superior returns."
Debt underwriting produced significant results, posting net revenues of $1.95 billion for the firm, the second best annual performance the highest for the firm since 2007.
For the full year, net revenues in investments and lending accounted for $5.89 billion in 2012, which were positively impacted by tighter credit spreads as well as an increase in global equity prices.
Goldman Sachs posted a gain of $408 million from the firm’s investment in the ordinary shares of Industrial and Commercial Bank of China Limited.
Net gains of $2.39 billion for the year from other investments in equities, primarily in private equities, net gains and net interest income of $1.85 billion from debt securities and loans related to the firm’s combined investment entities, the report noted.
For the fourth quarter, net revenues in investing and lending were $1.97 billion, positively impacted by generally tighter credit spreads and an increase in equity prices in Europe and Asia.
Results for 4Q12 included a gain of $334 million from the firm’s investment in shares of ICBC, net gains of $789 million from other investments in equities and net income of $485 million from debt securities and loans.
Goldman Sachs continued to lead in investment banking as well, ranking first globally in announced and complete merges as well as acquisitions for the year.
Book value per common share increased to $144.67, up 11%. Tangible book value per common share also increased to $134.06, up 12% compared to a year earlier.
Fitch Ratings told HousingWire the ratings agency viewed Goldman Sachs earnings report as "solid," noting the overall operating performance was better than analyst expectations with the firm maintaining a conservative liquidity and capital position.
"They are becoming more active in lending, but at the same time they are very active in the debt market and equity market as well," Fitch said.
Fitch also said Goldman Sachs performed better than expected as a result of cost containment, which helped the firm's bottom line.