GS
Earnings call · Mar 2025 (Q1 FY25)

GOLDMAN SACHS GROUP Q1 FY25 earnings call GS

Apr 14, 2025 Source

Executive summary

The Goldman Sachs Group, Inc. Q1 FY25 — Strong Performance Amidst Dynamic Markets

Goldman Sachs delivered strong Q1 FY25 results, demonstrating resilience and diversification amidst a highly dynamic and uncertain market environment. The firm leveraged its global franchise and risk management capabilities to navigate shifting sentiment, with robust performance in Global Banking and Markets, particularly in financing and equities intermediation. While macroeconomic headwinds persist, management remains focused on strategic investments, efficiency gains, and consistent capital returns to shareholders.

Highlights

5

  • Generated net revenues of $15.1 billion, EPS of $14.12, ROE of 16.9%, and ROTE of 18%.

  • Assets under supervision rose to a record $3.2 trillion, marking the 29th consecutive quarter of long-term fee-based net inflows.

  • Achieved record FICC financing revenues of $1 billion and record equities financing revenues of $1.6 billion, with total financing revenues up 22% YoY to $2.7 billion.

  • Investment Banking backlog increased for the fourth consecutive quarter, driven by a notable rise in advisory activity.

  • Returned $5.3 billion to common shareholders, including record common stock repurchases of $4.4 billion.

Concerns

5

  • Advisory revenues of $792 million were down compared to a strong performance in the prior year.

  • FICC intermediation performance was lower in credit, rates, and commodities versus a strong prior year.

  • Net gains in private equity investments were more than offset by declines in the public portfolio amidst a challenging market backdrop.

  • Expects to record a severance charge of approximately $150 million in Q2 FY25.

  • Economists' expectation for U.S. growth has fallen meaningfully from over 2% to 0.5%, with increased prospects of a global recession.

Guidance & targets

CategoryTargetConfidence
Effective tax rate
approximately 21%
medium materiality
High
Annual incentive fees
$1 billion
medium materiality
Medium
Management and other fees and private banking and lending revenue growth
high single-digit annual growth
medium materiality
Medium
Alternative fundraising
in line with recent years
medium materiality
Medium
Historical Principal Investments (HPI) reduction
vast majority of exposures sold down
high materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Global Banking & Markets
Produced strong revenues and ROE, driven by FICC and Equities businesses amidst policy uncertainty and market volatility.
ROE: over 20%
$10.7 billion———
Investment Banking
Muted activity due to volatility but strong league table positions and increased backlog.
Advisory revenues: $792 millionAdvisory revenues comparison: down YoYEquity underwriting revenues: $370 millionEquity underwriting revenues comparison: flat YoYDebt underwriting revenues: $752 millionDebt underwriting revenues growth: 8% YoYM&A league tables: #1Announced M&A volumes lead: over $70 billion vs next peerEquity and equity-related underwriting rank: #1High-yield debt underwriting rank: #2Leveraged lending rank: #2Backlog: up sequentially (notable increase in advisory)
————
FICC
Intermediation results mixed, but financing revenues reached a record.
Intermediation: higher client activity in currencies and mortgages, lower in credit, rates, and commoditiesFinancing revenues: $1 billionFinancing revenues comparison: record
$4.4 billion———
Equities
Record revenues driven by strong intermediation and financing performance.
Intermediation revenues: $2.5 billionIntermediation revenues growth: 28% YoYIntermediation drivers: strong performance in derivativesFinancing revenues: $1.6 billionFinancing revenues comparison: recordFinancing drivers: better portfolio financing results, record average prime balances
$4.2 billion———
Asset & Wealth Management
Strong revenues with growth in management fees and private banking, though impacted by historical principal investments.
ROE: roughly 10%Pretax margin (ex-HPI impact): 2 percentage points higherROE (ex-HPI impact): 2.6 percentage points higher
$3.7 billion——21% pretax margin
Management and other fees
Growth driven by higher average assets under supervision, with some sequential decline due to other fees.
Drivers: higher average assets under supervisionOther fees: varied quarter-to-quarter (includes placement fees)
$2.7 billion10% YoYdown slightly QoQ—
Incentive fees
Increased year-over-year despite difficult monetization environment.
Unrecognized incentive fees: estimated $4.1 billion as of year-end
$129 millionup YoY——
Private Banking and lending
Growth driven by lending, with NIM compression offset.
Drivers: higher lending revenuesSequential drivers: NIM compression on deposits offset by lending revenue growth
$725 million6% YoYroughly flat QoQ—
Equity investments and debt investments
Modest revenue, with private gains offset by public declines.
Drivers: largely net interest income in debt portfolioEquity investments: net gains in private portfolio offset by declines in public portfolio
$122 million———

Operational metrics

ROE
16.9%
Q1 FY25

Reported ROE.

ROTE
18%
Q1 FY25

Reported ROTE.

EPS impact from selected items
$0.25 reduced
Q1 FY25

Selected items reduced EPS by $0.25.

ROE impact from selected items
30 reduced
Q1 FY25

Selected items reduced ROE by 30 basis points.

Total financing revenues (FICC and Equities)
$2.7 billion 22% YoY
Q1 FY25

Combined financing revenues across FICC and Equities.

More durable revenues (AWM)
$3.4 billion 9% YoY
Q1 FY25

Aggregate of management and other fees and private banking and lending revenues.

Efficiency ratio
60.6%
Q1 FY25

Total quarterly operating expenses of $9.1 billion resulted in this efficiency ratio.

Compensation ratio (net of provisions)
33%
Q1 FY25

Compensation ratio net of provisions.

Non-compensation expenses
$4.3 billion
Q1 FY25

Non-compensation expenses for the quarter.

Effective tax rate
16.1%
Q1 FY25

Benefited from employee stock-based compensation.

Effective tax rate (ex-stock comp impact)
25.1% 9 points higher
Q1 FY25

Effective tax rate would have been 9 points higher excluding stock-based compensation impact.

Common Equity Tier 1 (CET1) ratio (standardized)
14.8%
Q1 FY25

CET1 ratio at quarter-end.

Capital returned to common shareholders
$5.3 billion
Q1 FY25

Total capital returned, including buybacks and dividends.

Common stock repurchases
$4.4 billion record
Q1 FY25

Record common stock repurchases.

Common stock dividends
$976 million
Q1 FY25

Common stock dividends paid.

Share repurchase program authorization
$40 billion
multiyear

Board authorized a multiyear share repurchase program.

Severance charge
$150 million expected
Q2 FY25

Expected severance charge in connection with annual performance management process and pyramid structure adjustments.

Attributed equity for HPI portfolio
approximately $4 billion
Q1 FY25

Attributed equity supporting the Historical Principal Investments portfolio.

Attributed equity for card portfolio
reasonably similar amount
Q1 FY25

Attributed equity supporting the credit card portfolio.

Assets under supervision (AUS)
$3.2 trillion record
Q1 FY25

Total assets under supervision.

Long-term net inflows (fee-based)
$29 billion 29th consecutive quarter
Q1 FY25

Long-term net inflows across asset classes.

Total fundraising of alternatives (since 2019)
$342 billion
since 2019

Total fundraising for alternatives since 2019.

Wealth Management revenue
$2.2 billion 11% YoY
Q1 FY25

Total Wealth Management revenue.

Client assets (Wealth Management)
$1.6 trillion record
Q1 FY25

Client assets in Wealth Management.

Private wealth advisers
over 1,000
Q1 FY25

Number of private wealth advisers.

Alternative assets under supervision
$341 billion
Q1 FY25

Alternative assets under supervision.

Management and other fees (alternatives)
$523 million
Q1 FY25

Fees generated from alternative assets under supervision.

Gross third-party alternatives fundraising
$19 billion
Q1 FY25

Gross fundraising for third-party alternatives.

Total loan portfolio
$210 billion up QoQ
Q1 FY25

Total loan portfolio at quarter end.

Provision for credit losses
$287 million
Q1 FY25

Provision for credit losses.

Historical Principal Investments (HPI) balance
$8.8 billion down from $16 billion at start of last year
Q1 FY25

Remaining balance of Historical Principal Investments.

Average daily VAR
— down broadly Q-on-Q
Q1 FY25

Reduced exposures offset by elevated volatility led to lower average daily VAR.

Industry KPIs

MetricValueDetails
Net interest income$2.9 billion USD

Deals & partnerships

Google Advisory role for Google's acquisition of Wiz $32 billion

Largest transaction in Israeli history.

Walgreens Boots Alliance Advisory role for the take private of Walgreens Boots Alliance $24 billion

Firm with presence across the U.S., Europe and Latin America.

Risks & headwinds

Macroeconomic slowdown and recession risk near-term and longer-term

U.S. growth expectation fallen from over 2% to 0.5%; increased prospect of recession globally.

Mitigation:Hopeful for a more gradual policy process and clarity on forward policy to support economic certainty and long-term growth.

Market volatility and policy uncertainty until further clarity

Rapidly shifting sentiment; uncertainty around path forward and fears over escalating effects of a trade war.

Mitigation:Clients turn to Goldman Sachs for execution and insight; firm's leading franchises are well-positioned to support clients.

Muted investment banking activity Q1 FY25

Volatile backdrop led to more muted activity relative to expectations.

Mitigation:Client dialogues remain elevated, and backlog is up for the fourth consecutive quarter; ability to execute dependent on market conditions.

Difficult monetization environment Q1 FY25

Incentive fees up YoY despite difficult monetization environment; net gains in private portfolio offset by declines in public portfolio.

Mitigation:Expects to make progress on target of $1 billion in annual incentive fees over medium term, supported by $4.1 billion unrecognized fees.

NIM compression on deposits Q1 FY25

Sequentially, Private Banking and lending results were roughly flat as NIM compression on deposits was offset by lending revenue growth.

Mitigation:Offset by lending revenue growth.

What to watch in Q2 FY25

Severance charge impact

Q2 FY25
Current Expected $150 million
Target Confirmation of charge and impact on Q2 expenses.

Why it matters

This charge will impact Q2 profitability and is part of the firm's 3-year efficiency plan.

I would expect that we'll record a severance charge in the second quarter of approximately $150 million in connection with a number of those actions.

Q&A highlights

Glenn asked about the impact of recent deleveraging in April on the strong financing revenues seen in Q1, particularly given record prime balances.

Denis Coleman stated that while some prime balances might come down due to asset price resets, the impact on overall financing revenues is not expected to be material or major. Clients remain active in repositioning portfolios, leading to continued demand for financing.

“I would not characterize it as material or major. You have a number of things happening at the same time. You have deleveraging activity on behalf of clients and you have changes in their overall levels of balances, but you also have lots of different types of activity as clients reposition their portfolios and make sure that they adjust for their evolving views on the outlook.”

asked by Glenn Schorr · answered by Denis Coleman

2 min read 5 chapters

Detailed narrative

Global Macroeconomic Outlook and Policy Uncertainty

Management highlighted a significant shift in the operating environment, with U.S. growth expectations falling from over 2% to 0.5% and increased recession prospects globally. This uncertainty, coupled with fears over escalating trade wars, has constrained client decision-making. The firm is hopeful for a more gradual policy process allowing for negotiations and greater economic certainty, noting that markets will likely remain volatile until clarity emerges.

Strategic Investments and Efficiency

Goldman Sachs is actively executing a 3-year efficiency plan, focusing on unlocking efficiencies in technology and automation. This includes leveraging AI solutions to enhance engineering capabilities, simplify technology stacks, and improve productivity through tools like a developer copilot and a natural language GS AI assistant. The firm anticipates significant productivity gains from accelerated AI adoption both internally and for the broader economy.

Capital and Regulatory Environment

The firm appreciates the administration's focus on calibrating financial services regulation. Management expressed optimism for material progress across capital, leverage, liquidity, and supervision, citing the potential for SLR reform, Basel III adjustments, and increased transparency in CCAR and G-SIB surcharges. Such reforms are expected to provide a tailwind for the industry, allowing for more efficient capital deployment and returns.

Alternatives and Wealth Management Growth

Assets under supervision reached a record $3.2 trillion, driven by 29 consecutive quarters of long-term fee-based net inflows. The alternatives business raised $19 billion in the quarter, contributing to $342 billion since 2019, with new flagship funds launched across various strategies. Wealth Management revenue grew 11% YoY to $2.2 billion, with client assets reaching $1.6 trillion, supported by a strong advisor platform and recent industry accolades.

Investment Banking Backlog and Market Activity

Despite a volatile backdrop leading to muted activity in early 2025, client dialogues remain elevated, and the investment banking backlog is up for the fourth consecutive quarter, particularly in advisory. Management noted that changes in the landscape often prompt companies to rethink strategic positioning, suggesting continued M&A activity, though execution remains dependent on market conditions and policy clarity.

AI-generated summary of the company's earnings call. Not investment advice.