Goldman Sachs' 4th-quarter earnings beat estimates as trading desks continue to impress

• Goldman Sachs reported fourth-quarter figures on Tuesday that beat Wall Street's expectations for revenue and profit.
• The bank added $293 million to its loan-loss reserves through the quarter, further bolstering its safety net at the expense of stronger profits.
• Still, outperformance by various trading desks buttressed earnings in the last three months of 2020.
• Goldman gained as much as 2.3% in early-Tuesday trading.
• Watch Goldman Sachs trade live here.

Goldman Sachs reported earnings on Tuesday that surpassed analyst estimates for fourth-quarter earnings and revenue.

Strong trading income across desks offset a slight uptick in the bank's lending reserves. Goldman added $293 million to its loan-loss reserves through the final quarter of the year, slightly increasing its protection against the potential of soured loans amid rising COVID-19 cases. The addition was 5% greater than that seen in the previous quarter.

Goldman shares gained as much as 2.3% in early-Tuesday trading.

Here are the key numbers:

• Revenue: $11.7 billion, versus the $9.94 billion estimate from analysts surveyed by Bloomberg
• Trading revenue: $4.27 billion, versus the $3.98 billion estimate
• Earnings per share: $12.08, versus the $7.31 estimate

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"We hope this year brings much needed stability and a respite from the pandemic, but we remain ready to handle a wide range of outcomes and are poised to meet the needs of our clients," CEO David Solomon said in a statement.

Goldman's equities revenue reached $2.39 billion for the three-month period, up 40% from the fourth quarter of 2019. The bank leans more heavily on its trading desks and deal-advising business than other banks. Accordingly, strong volatility and the stock market's rally into the end of last year was a major boon for Goldman.

Fixed-income sales and trading brought in $1.88 billion for the bank. That was up 6% from the year-ago period. Investment banking revenue climbed 27% from the fourth quarter of 2019 to $2.61 billion. 

The rosy report follows third-quarter results that surprised to the upside. Profit more than doubled from the year-ago period as a mild addition to credit reserves was offset by trading desks' surging revenues. Equities underwriting in the third quarter was Goldman's second-highest in history.

While early, bank earnings have so far come up mixed. JPMorgan trounced Wall Street's estimates for revenue and earnings when it reported earnings on Friday, largely bolstered by a $2.9 billion drop in loan-loss reserves. Citigroup, however, surprised to the downside after weaker-than-expected sales from its fixed-income trading desk led revenue to land below forecasts.

Bank of America and Charles Schwab are among the other finance-sector giants reporting earnings on Tuesday.

Goldman closed at $301.01 on Friday, up roughly 16% year-to-date. The bank has 24 "buy" ratings, 10 "hold" ratings, and one "sell" rating from analysts.

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