Goldman Sachs Group Inc. has predicted that the stock-market collapse this month will not disrupt their dealmaking business. They are also putting a brave face on and being positive that the torrid pace for last year's deal making will go on this year in spite of markets plummeting.
"We wouldn't say that two weeks of volatile markets would stop a pretty powerful M&A (Mergers and Acquisitions) trend," Goldman Chief Financial Officer Harvey Schwartz said in a conference call with analysts last Wednesday.
Wall Street Journal reported that the 2015 M&A champion's results have relied more on investment bankers, making it a heated debate and an important issue. This is because its trading desks, which were considered strong before, are now edged with hard regulations.
Also, the Wall Street firm, together with other banks, struggled greatly with the weight put on credit markets. This includes the plunging oil prices, China's economic concerns and the problematic pace and timing of the U.S. interest rate, according to Economic Times.
Goldman's Chairman and Chief Executive Lloyd Blankfein shared the firm's smallest quarterly profit in more than four years as it tumbled 65 percent. As mentioned, weak trading conditions, plus paying a huge regulatory penalty (which amounted to $5 billion) made all things difficult.
Thus, its fourth quarter net income dropped to $765 million from $2.17 billion last year. This also meant for a share falling to $1.27 from $4.38, Nasdaq stated.
If it weren't for the $5 billion settlement with the Justice Department and other law-enforcement authorities, Goldman's quarterly profit would have increased. However, they indeed needed to solve the financial crises brought about by their mortgage-bond sales practices.
As for analyst Jeff Harte, he thinks that investment banking is truly a bright spot, which is an advantage for Goldman as its deal pipeline remains strong, especially those deals that have not closed yet. Also, since its deal pipeline has improved a lot in the fourth quarter, it is a sign that the M&A boom might continue this year despite markets being under pressure.
