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    GS
    Earnings call· Mar 2025(Q1 FY25)

    GOLDMAN SACHS GROUP INC 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

    5
    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

    9
    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

    32
    ROE
    16.9%
    Q1 FY25

    Reported ROE.

    ROTE
    18%
    Q1 FY25

    Reported ROTE.

    EPS impact from selected items
    $0.25reduced
    Q1 FY25

    Selected items reduced EPS by $0.25.

    ROE impact from selected items
    30reduced
    Q1 FY25

    Selected items reduced ROE by 30 basis points.

    Total financing revenues (FICC and Equities)
    $2.7 billion22% YoY
    Q1 FY25

    Combined financing revenues across FICC and Equities.

    More durable revenues (AWM)
    $3.4 billion9% 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 billionrecord
    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 millionexpected
    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 trillionrecord
    Q1 FY25

    Total assets under supervision.

    Long-term net inflows (fee-based)
    $29 billion29th 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 billion11% YoY
    Q1 FY25

    Total Wealth Management revenue.

    Client assets (Wealth Management)
    $1.6 trillionrecord
    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 billionup 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 billiondown 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

    1
    MetricValueDetails
    Net interest income$2.9 billionUSD

    Deals & partnerships

    2
    GoogleAdvisory role for Google's acquisition of Wiz$32 billion

    Largest transaction in Israeli history.

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

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

    Risks & headwinds

    5
    Macroeconomic slowdown and recession risknear-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 uncertaintyuntil 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 activityQ1 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 environmentQ1 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 depositsQ1 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

    5

    Severance charge impact

    Q2 FY25
    CurrentExpected $150 million
    TargetConfirmation 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

    7

    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 read5 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.