Goldman Sachs did not produce any surprises with its quarterly earnings. In fact, as shown below, they increased book value per share by 5% during 2013, maintained strong capital ratios despite buying back around 8% of the shares (3% on a fully diluted basis due to stock issuance) and still retains significant core liquidity:
Operationally strength in underwriting, fixed income servicing and equity securities drove the numbers, as shown below, and even though year-on-year revenues were down in Q4, continued good cost control helped drive a 9% increase in EPS.
The model is working in a solid manner. My issue is what you value that at. Return on equity of 12.7% in Q4 and 11% in FY13. Based on the Wednesday close, the shares are trading on x1.25 the end of 2013 tangible book value. 12.7% Q4 return on equity / x1.25 price: tangible book...that's smacking of fairly valued.
Look too how GS shares have correlated with the S&P over the last year.
Even though GS has material debt and non-equity interests, how goes the S&P, goes GS? Based on sentiment and likely direction of return on equity, that seems a fair summary to me...