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Fundamental View
AS OF 16 Dec 2024Goldman Sachs’ performance and market share in its core legacy businesses of investment banking and sales and trading have remained very solid, working through soft periods associated with rising rates; with market conditions improving into 2025 these businesses should continue to excel.
Goldman’s results have been weighed in recent years by costs associated with exiting the unsuccessful foray into various consumer banking businesses; such costs are largely in the rearview mirror. Wealth and Asset Management are now the most likely areas of growth in the coming years, where Goldman can leverage its strengths in HNW and alternative asset management.
Goldman Sachs’ (A2/BBB+/A) HoldCo long-term debt ratings have stable outlooks.
Business Description
AS OF 16 Dec 2024- Goldman Sachs is now the fifth largest bank holding company in the U.S. with approximately $1.73 tn in assets as of 3Q24 and a market capitalization of $198.4 bn as of Nov 21, 2024.
- Goldman Sachs presents its activities through three business segments: Global Banking & Markets, Asset & Wealth Management, and Platform Solutions.
- Goldman's historical strengths include equity and FICC sales & trading, investment banking, institutional investment management including alternatives, and high net worth wealth management. It has been expanding its wealth management client base, and adding other stable fee income streams amid a sluggish capital market environment.
Risk & Catalysts
AS OF 16 Dec 2024The early 2020’s have been a mixed bag– the foray into consumer lending was costly and ultimately was reversed, diverting capital and management attention and providing a meaningful drag on profitability. Goldman has re-focused on its core businesses, though its profile will remain less diversified than large GSIB peers.
Goldman could participate in further M&A to achieve its long-term strategic goals, most likely through add-on deals related to asset/wealth management.
Goldman could be impacted by the lack of liquidity in the secondary markets during periods of market turmoil, but for the most part, has been positively impacted by bouts of volatility which tend to spur more client trading activity. Goldman is subject to significant market and counterparty risks though these are captured in elevated capital requirements as a result of the DFAST and SCB regime.
Key Metric
AS OF 16 Dec 2024| $ mn | FY20 | FY21 | FY22 | FY23 | 3Q24 |
|---|---|---|---|---|---|
| ROAE (annual) | 10.3% | 21.3% | 9.7% | 7.3% | 10.3% |
| ROAA (annual) | 0.8% | 1.5% | 0.7% | 0.5% | 0.7% |
| PPNR / Avg. Assets | 1.34% | 1.86% | 1.08% | 3.29% | 1.00% |
| Efficiency Ratio | 66% | 54% | 65% | 282% | 66% |
| Net charge-offs (LTM) / Loans | 0.70% | 0.19% | 0.30% | 0.68% | 0.64% |
| Common Dividend Payout | 19.0% | 10.6% | 28.4% | 158.9% | 30.9% |
| CET1 Ratio | 14.1% | 13.6% | 15.0% | 14.4% | 14.7% |
| Supplementary Leverage Ratio (SLR) | 6.9% | 5.5% | 5.8% | 5.5% | 5.5% |
| Liquidity Coverage Ratio (LCR) | 128% | 122% | 129% | 128% | 126% |
CreditSight View Comment
AS OF 05 Dec 2024We maintain our Market perform recommendation for Goldman Sachs; we remain quite comfortable with the name fundamentally but see better value at JPMorgan and Wells Fargo among money center banks, particularly in the context of our shift to a more defensive stance across the sector. Goldman should be back to a normal pace of issuance so technicals should not be quite as much of a tailwind going forward as they had been in 2023 and early 2024, though the fundamental picture continues to improve with improved capital markets conditions as well as reduced drag from exited businesses. Results in 3Q24 showed further momentum in the investment banking businesses and particularly strong equities activity; conditions are helping A&WM as well.
Recommendation Reviewed: December 05, 2024
Recommendation Changed: January 12, 2022
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