Goldman Sachs Group Inc. expresses optimism regarding deal making on Wall Street as the investment bank looks ahead to the upcoming year. Despite recent challenges, the chief financial officer of Goldman Sachs, Dennis Coleman, believes that the macroeconomic environment is becoming more supportive for improved debt transactions and other deals.
Positive Outlook for 2024
Speaking at the Goldman Sachs U.S. Financial Services Conference, Coleman stated that they anticipate a clearer path in 2024. This positive sentiment is driven by a growing sense of confidence in the market.
Strong Performance in Equities and Fixed-Income Units
Coleman further highlighted the bank’s continued client engagement in its equities and fixed-income units. Throughout the entire year, the equities business has been a consistent source of strength for Goldman Sachs. With this performance, they are well-positioned in the market.
Maintaining Leadership in Key Areas
Although investment banking has been below trend, Goldman Sachs remains the number one player in the merger-and-acquisition advisory business. They also rank at the top in equities and second in high-yield debt. Despite a lower level of activity, they maintain a solid backlog, strong client relationships, and a strategic position in banking.
Focus on Performance-Based Compensation
Coleman expressed that pay for performance is a key focus at Goldman Sachs. They expect expenses to increase by a low single-digit percentage for the full year of 2023, including severance expenses.
No Comment on Credit-Card Venture with Apple Inc.
Coleman did not address reports concerning the potential end of Goldman’s credit-card venture with Apple Inc. He referred to General Motors Co.’s announcement about finding a potential new issuer under its credit-card program as a public statement.
Overall, Goldman Sachs remains optimistic about the future of deal making on Wall Street, citing an improved macroeconomic background and their strong performance in equities and fixed-income units.
Investment Banking Market Trends
The investment banking market in the fourth quarter has shown “muted” trends, according to a report by Jefferies. When comparing the fourth quarter of this year to the same period last year, JPMorgan Chase & Co. saw a roughly 15% increase in investment-banking revenue, while Citigroup Inc. was up by about 13%.
However, Bank of America Corp.’s investment-banking revenue experienced a slight decline, while Morgan Stanley and Goldman Sachs faced decreases of about 3% and 10%, respectively.
Compared to the third quarter, investment-banking revenue has seen significant increases at Morgan Stanley and decreases at Citigroup, Goldman Sachs, and JPMorgan. Bank of America’s revenue has declined by approximately 9%.
Despite these fluctuations, Jefferies analysts remain optimistic about a potential capital markets comeback in 2024. They have observed signs of improvement in deal announcement volumes.
Additionally, the fourth quarter has shown some positive developments in the fixed income and equities sectors. However, volatility across the sector remains mixed.
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