Goldman Sachs Puts Losses Behind It, Stock Comes to Life

All’s well that ends well. While the global economic slowdown triggered by Europe’s growing debt problems doesn’t show any signs of ending soon, Goldman Sachs (NYSE:GS) might as well be content with the fact that 2011 ended on a positive note. The global investment bank managed to exceed expectations by earning just over $1 billion in Q4 2011. ^[1] And investors who have been quite eager to reward better-than-expected performers in recent weeks helped the bank’s shares gain more than 7% over trading last Wednesday after the bank declared its results. Morgan Stanley (NYSE:MS) also had a similar run at Wall Street when it declared its lower-than-expected loss numbers.

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Goldman Sachs did well to reverse the loss it reported in Q3 2011 – only the second time in the history of the investment bank since it went public that it had to use any red ink while declaring quarterly results. But a glance through its performance for Q4 2011 highlights the fact that the situation did not get any better for the period.

In an environment not conducive to any form of investment banking activity, Goldman kept its numbers afloat largely through the sale of a bulk of its stake in the Industrial and Commercial Bank of China (ICBC). The ICBC stake sale brought in about $1.5 billion and the appreciation in share prices over the quarter resulted in a $388 million gain in the remaining stake.

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1. Goldman Sachs Fourth Quarter 2011 Earnings, Goldman Sachs News Releases, Jan 18 2012 [↩]