Goldman Sachs Nears a Share-Price Record

The pandemic recession has thrown up roadblocks for most of the nation’s largest banks. Not so for Goldman Sachs Group Inc. GS 5.13%

The Wall Street giant’s share price is on the cusp of hitting a record for the first time in nearly three years, a sign of how much the bank has profited from the financial chaos of the past year. Its stock has risen about 15% over the past month, far more than any of its five big-bank peers.

Goldman shares had been static for years, a perpetual concern for Chief Executive David Solomon and one that led him to peel back some of the bank’s famous secrecy a year ago. At the time, its trading business was languishing amid efforts to build a consumer bank and grow its wealth-management business.

The pandemic pushed many of those challenges aside. It spurred roller-coaster markets that lifted its traditional sales-and-trading business. Then, as markets bounced back, its bankers made money helping corporate clients sell debt and equity.

The investment-banking business probably stayed strong in the last three months of the year. Jefferies Financial Group Inc. said late Monday that its investment-banking revenue hit a record in the fourth quarter, which analysts see as a favorable sign for larger competitors such as Goldman.

Shares of the bank, which reports earnings later in the month, rose 3% Wednesday morning, putting the stock on pace to close above its 2018 high. The prospect of rising interest rates after Georgia’s Senate runoff elections pushed up bank shares broadly.

Unlike JPMorgan Chase & Co. and Bank of America Corp. , Goldman doesn’t have a large consumer bank. That held back its share price during a bank stock rally in 2019, when healthy U.S. consumers helped push the megabanks to big profits.

But the coronavirus recession made that heavy consumer exposure a liability, forcing banks to set aside tens of billions of dollars to prepare for potential loan losses. JPMorgan, the largest bank in the U.S. by assets, was about 11% below its record at Tuesday’s market close. Goldman’s stock, meanwhile, outperformed most of its peers in 2020 and into 2021.

Other factors also have boosted Goldman’s share price: The bank entered into a multibillion-dollar settlement with the Justice Department in October, closing the door on a long-running probe into its work for a corrupt Malaysian government fund known as 1MDB.

In December, the Federal Reserve loosened its pandemic restrictions on share repurchases. Buybacks can lift a company’s share price by pulling stock out of the market and making earnings look stronger on a per-share basis.

Banks will be able to return capital in the first quarter, but it can’t exceed their average quarterly profit over the past year. That may benefit Goldman, in particular, because of its strong profitability.

Write to Ben Eisen at ben.eisen@wsj.com

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