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Fundamental View
AS OF 26 Aug 2024Goldman Sachs has had solid but mixed results in recent years, with strength in trading results particularly during periods of market volatility. Investment banking results have weakened in line with market conditions but Goldman’s market share remains strong. Investment banking appears to be rebounding in 1H24. The funding profile has improved over time with increased deposit funding.
Goldman remains well behind “Big 6” peers in diversifying its revenue base beyond its historical strong points. Wealth and Asset Management are now the most likely areas of growth in the coming years. Goldman’s results have been weighed by consumer banking exits though those costs are subsiding.
Goldman Sachs’ (A2/BBB+/A) HoldCo long-term debt ratings have stable outlooks.
Business Description
AS OF 26 Aug 2024- Goldman Sachs is now the fifth largest bank holding company in the U.S. with approximately $1.65 tn in assets as of 2Q24 and a market capitalization of $152.9 bn as of Aug 6, 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 26 Aug 2024From a fundamental standpoint, the past several years have been a mixed bag. Goldman’s foray into consumer lending was costly and ultimately did not work, diverting capital and management attention away from its core businesses and providing a meaningful drag on profitability. Management through most of the process of selling consumer-related businesses. Goldman’s performance has remained strong in its legacy areas of strength in trading and investment banking.
Goldman could participate in further M&A to achieve its long-term strategic goals, as it has in recent years with mixed results; 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.
Key Metric
AS OF 26 Aug 2024| $ mn | FY20 | FY21 | FY22 | FY23 | 2Q24 |
|---|---|---|---|---|---|
| ROAE (annual) | 10.3% | 21.3% | 9.7% | 7.3% | 9.6% |
| ROAA (annual) | 0.8% | 1.5% | 0.7% | 0.5% | 0.7% |
| PPNR / Avg. Assets | 1.34% | 1.86% | 1.08% | 3.29% | 0.92% |
| Efficiency Ratio | 66% | 54% | 65% | 282% | 68% |
| Net charge-offs (LTM) / Loans | 0.70% | 0.19% | 0.30% | 0.68% | 0.66% |
| Common Dividend Payout | 19.0% | 10.6% | 28.4% | 158.9% | 33.1% |
| CET1 Ratio | 14.1% | 13.6% | 15.0% | 14.4% | 14.9% |
| 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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