Analyst Note| Michael Wong, CFA, CPA |
On an adjusted basis excluding litigation and regulatory costs, 2020 was a great year for narrow-moat Goldman Sachs. For the full year, pre-provision net revenue increased 22% to $44.6 billion. Areas of strong performance included equity underwriting that was up 130% to $3.4 billion, FICC (fixed income, currency, and commodities) trading that was up 57% to $11.6 billion, equities trading that was up 30% to $9.6 billion, and consumer banking that was up 40% to $1.2 billion. Diluted earnings per share increased 18% to $24.74, and return on average common shareholders’ equity was 11.1%. Excluding net provisions for litigation and regulatory proceedings of $3.42 billion, mainly related to the 1MDB event, adjusted diluted earnings per share would have been over $34 and return on common equity would have been about 15%. We don’t anticipate making a significant change to our $238 fair value estimate for Goldman Sachs.