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    GS
    Earnings call· Dec 2024(Q4 FY24)

    GOLDMAN SACHS GROUP INC GS

    Jan 15, 2025 Source

    Executive summary

    Goldman Sachs Q4 FY24 — Strong Performance Driven by Global Banking & Markets and AWM Growth

    Goldman Sachs delivered strong Q4 and full-year FY24 results, driven by robust performance in Global Banking & Markets and record revenues in Asset & Wealth Management. The firm is executing on its strategic priorities, including narrowing its focus and driving operating efficiencies, with a clear path to achieving mid-teens returns despite ongoing regulatory uncertainty and the drag from Platform Solutions. Management expressed optimism for increased capital markets activity in 2025.

    Highlights

    6

    • Q4 revenues of $13.9 billion, with EPS of $11.95, ROE of 14.6%, and ROTE of 15.5%.

    • Full-year revenues increased 16% to $53.5 billion, and EPS grew 77% to $40.54.

    • Full-year ROE improved over 500 basis points to 12.7%, demonstrating strong operating leverage.

    • Management and other fees surpassed $10 billion for the full year, exceeding the 2024 target.

    • Assets under supervision reached a record $3.1 trillion, driven by $70 billion of liquidity products net inflows and $22 billion of long-term fee-based net inflows.

    • Returned approximately $3 billion to common shareholders in Q4, including $2 billion in common stock repurchases and $965 million in dividends.

    Concerns

    3

    • Platform Solutions was a 75 to 100 basis point drag on the firm's overall ROE in 2024.

    • Regulatory uncertainty persists regarding CCAR stress testing, Basel III, and G-SIB calibration, leading to an industry lawsuit against the Federal Reserve.

    • Geopolitical risks and broad policy initiatives (immigration, trade, tax, energy) could impact market sentiment and the business environment.

    Guidance & targets

    6
    CategoryTargetConfidence
    AWM Management and other fees and private banking and lending revenues growth
    high single-digit annual growth
    medium materiality
    High
    Platform Solutions pretax profitability
    pretax breakeven
    high materiality
    High
    Alternatives fundraising levels
    consistent with levels achieved in recent years
    medium materiality
    Medium
    Effective tax rate
    approximately 20%
    medium materiality
    High
    M&A and IPO activity
    further pickup
    high materiality
    High
    Incentive fees
    make further progress towards our annual target of $1 billion
    medium materiality
    Medium

    Segment performance

    3
    SegmentRevenueYoYQoQMargin
    Global Banking & Markets
    Broad-based strength contributed to significant revenue growth. Strong performance in Investment Banking, FICC, and Equities, with record financing revenues. The firm maintained leading positions in key league tables.
    Investment Banking fees (Q4): $2.1 billionInvestment Banking fees growth (Q4 YoY): 24%Advisory revenues (Q4): $960 millionEquity underwriting revenues (Q4): $499 millionNet underwriting revenues (Q4): $595 millionNet underwriting revenues growth (Q4 YoY): 51%FICC net revenues (Q4): $2.7 billionFICC net revenues growth (Q4 YoY): 35%FICC financing revenues (Q4): Record, up 34% YoYEquities net revenues (Q4): $3.5 billionEquities intermediation revenues (Q4): $2 billionEquities intermediation revenues growth (Q4 YoY): 30%Equities financing revenues (Q4): Record $1.5 billionEquities financing revenues growth (Q4 YoY): 36%Total Equities net revenues (FY24): Record $13.4 billionFICC and Equities financing revenues (FY24): Record $9.1 billionFICC and Equities financing revenues growth (FY24 YoY): 17%M&A adviser ranking (2024): #1 (announced and completed)Equity underwriting ranking (2024): #3Leveraged lending ranking (2024): #2Investment Banking backlog: Rose sequentially and remains robust
    		$35 billion16%—16% average ROE (last 5 years)
    Asset & Wealth Management
    Record revenues driven by growth in management and other fees and private banking and lending. Strong inflows contributed to record assets under supervision. The segment achieved its medium-term pretax margin target.
    Management and other fees (Q4): Record $2.8 billionManagement and other fees growth (Q4 QoQ): 8%Management and other fees growth (Q4 YoY): 15%Private banking and lending revenues (Q4): $736 millionPrivate banking and lending revenues growth (Q4 YoY): 11%Incentive fees (Q4): $174 millionIncentive fees (FY24): $393 millionEquity and debt investment revenues (Q4): $993 millionEquity and debt investment revenues (FY24): $2.4 billionAssets under supervision (Q4 end): Record $3.1 trillionLiquidity products net inflows (Q4): $70 billionLong-term fee-based net inflows (Q4): $22 billionAlternatives assets under supervision (Q4 end): $336 billionGross third-party fundraising (Q4): $20 billionGross third-party fundraising (FY24): $72 billion
    		$16.1 billion16%—Pretax margin improved in 2024, achieving medium-term target
    Platform Solutions
    The segment continues to be a drag on the firm's overall ROE, but the Apple Card partnership is driving towards profitability, expected to improve the drag in 2025 and 2026.
    ROE drag (FY24): 75-100 bps
    		————

    Operational metrics

    22
    Return on Equity (ROE)
    14.6%
    Q4 FY24

    Firm-wide ROE for the fourth quarter.

    Return on Equity (ROE)
    12.7%improved over 500 basis points
    FY24

    Firm-wide ROE for the full year, showing significant improvement.

    Return on Tangible Equity (ROTE)
    15.5%
    Q4 FY24

    Firm-wide ROTE for the fourth quarter.

    Compensation ratio net of provisions
    32%
    FY24

    Firm-wide compensation ratio for the full year.

    Noncompensation expenses
    $4.5 billiondown 8% year-over-year
    Q4 FY24

    Firm-wide noncompensation expenses for the fourth quarter.

    Effective tax rate
    22.4%
    FY24

    Firm-wide effective tax rate for the full year.

    Common Equity Tier 1 (CET1) ratio (standardized)
    15%130 basis points above current capital requirement
    Q4 FY24 end

    CET1 ratio at quarter end, indicating capital strength relative to regulatory minimums.

    Capital returned to common shareholders
    $3 billion
    Q4 FY24

    Total capital returned to shareholders in the fourth quarter.

    Total operating expenses
    $33.8 billion
    FY24

    Firm-wide total operating expenses for the full year.

    Total loan portfolio
    $196 billionup year-over-year
    Q4 FY24 end

    Total loan portfolio balance at the end of the fourth quarter.

    Provision for credit losses
    $351 million
    Q4 FY24

    Provision for credit losses in the fourth quarter.

    Private wealth lending balances
    up $5 billion
    FY24

    Growth in private wealth lending balances over the full year.

    Efficiency ratio
    63%improved by 1,200 basis points
    FY24

    Firm-wide efficiency ratio for the full year, moving closer to the 60% target.

    Firm-wide revenue growth
    16%
    FY24

    Overall revenue growth for the firm in 2024.

    EPS growth
    77%
    FY24

    Earnings per share growth for the firm in 2024.

    FICC and Equities financing revenues CAGR
    15%
    last 5 years

    Compound annual growth rate for FICC and Equities financing revenues over the last five years.

    Management and other fees and private banking and lending revenues CAGR
    12%
    since 2019

    Compound annual growth rate for durable revenue streams in Asset & Wealth Management since 2019.

    Assets under supervision (AUS)
    $3.1 trillionrecord
    Q4 FY24 end

    Total assets under supervision at the end of the fourth quarter.

    Total client assets (Wealth Management)
    $1.6 trillion
    Q4 FY24 end

    Total client assets within the Wealth Management business.

    Alternatives fundraising
    $72 billion
    FY24

    Gross third-party fundraising for alternatives for the full year.

    Management and other fees
    over $10 billionexceeded 2024 target
    FY24

    Total management and other fees for the full year, surpassing the firm's target.

    Long-term fee-based net inflows
    28th consecutive quarter
    Q4 FY24

    Indicates consistent positive net inflows into long-term fee-based products.

    Deals & partnerships

    3
    GreenSkySale of GreenSky

    The firm closed on the sale of GreenSky as part of narrowing its strategic focus.

    General MotorsTransition of credit card program

    The firm entered into an agreement with General Motors to transition their credit card program, aligning with its strategic focus adjustments.

    VariousSale of seller financing loans portfolio

    The firm sold its portfolio of seller financing loans as part of its strategic narrowing.

    Risks & headwinds

    5
    Regulatory Uncertaintynext 2-3 years

    CCAR stress testing, Basel III Endgame, G-SIB surcharge impact

    Mitigation: Industry lawsuit filed against Federal Reserve; hopeful for constructive dialogue and improved transparency/consistency in regulatory process, especially with changes in administration and Fed leadership.

    Policy Initiatives Impactongoing

    Unquantified sentiment shifts

    Mitigation: Firm is resilient and manages for the medium and long term, constantly thinking about how the environment can change and evolve.

    Geopolitical Risksongoing

    Unquantified impact on market sentiment

    Mitigation: Firm is fundamentally risk managers, focused on resilience and being prepared for the unexpected.

    Cyber Riskongoing

    Unquantified

    Mitigation: Firm spends a lot of time thinking about cyber risk.

    Platform Solutions Drag on ROE2025 and 2026

    75-100 bps drag on firm's overall ROE in 2024

    Mitigation: Apple Card partnership is driving towards profitability, which is expected to improve the short-term drag in 2025 and 2026.

    What to watch in Q1 FY25

    5

    M&A and IPO activity pickup

    Throughout 2025
    CurrentMeaningful pickup in large-cap M&A dialogue and sponsor inquiry, strong positive backlog trends.
    TargetFurther pickup in activity.

    Why it matters

    Indicates a more constructive environment for capital markets, driving Investment Banking fees.

    I think you're going to see it throughout 2025. I don't want to speculate where it will land versus 10-year averages, but it's certainly setting up to be much more constructive and robust.

    Q&A highlights

    8

    How will the regulatory outlook, particularly around capital requirements, impact the capital markets business over the next 2-3 years?

    David Solomon discussed the industry lawsuit against CCAR due to lack of transparency, the expectation of a different approach to Basel III given changes in administration and Fed leadership, and the need for G-SIB recalibration. He noted the unpredictability but expressed hope for constructive discussions to improve transparency and consistency.

    “Net-net, unpredictable. I don't want to predict. I don't want to speculate. But certainly, it feels like we're in an environment where there can be a constructive discussion about improving the transparency, clarity and consistency around this.”

    asked by Ebrahim Poonawala · answered by David Solomon

    2 min read7 chapters

    Detailed Narrative

    01

    Strategic Focus & Performance

    Goldman Sachs has met or exceeded almost all targets laid out at its 2020 Investor Day, growing revenues by nearly 50% to $54 billion and improving revenue durability. The firm has narrowed its strategic focus, closing on the sale of GreenSky, entering an agreement to transition the GM credit card program, and selling its portfolio of seller financing loans.

    02

    Global Banking & Markets Strength

    The Global Banking & Markets (GBM) franchise has produced average revenues of $33 billion and an average ROE of 16% over the last five years across varied market environments. Management sees catalysts for increased activity in 2025, including improved CEO confidence, a significant backlog from sponsors, and an improving regulatory backdrop, which should spur further M&A and IPO activity.

    03

    Capital Solutions Group Formation

    The firm announced the formation of its Capital Solutions Group, designed to harness the power of 'One Goldman Sachs'. This group will provide clients with a comprehensive suite of financing, origination, structuring, and risk management offerings across both public and private markets. This aims to accelerate growth by better connecting companies to dependable capital and investors to assets.

    04

    Asset & Wealth Management Growth

    Asset & Wealth Management (AWM) assets under supervision reached a record $3.1 trillion, driven by 28 consecutive quarters of long-term fee-based net inflows. Management and other fees, along with private banking and lending revenues, grew at a 12% CAGR since 2019, with expectations for high single-digit annual growth going forward⏳. The AWM pretax margin improved in 2024, achieving its medium-term target.

    05

    Operating Efficiency & AI Initiatives

    Goldman Sachs is implementing a 3-year program to drive further operating efficiencies across its business. This program focuses on optimizing organizational footprint, spend management, and leveraging AI solutions to scale engineering capabilities, modernize technology, and drive productivity. These efficiencies are intended to fund further investments for growth and improve client experience.

    06

    Path to Mid-Teens Returns

    The firm has a clear path to achieving its target returns by maintaining mid-teens returns in Global Banking & Markets, driving Asset & Wealth Management to mid-teens and beyond, and achieving pretax breakeven in Platform Solutions by 2025. The drag from Platform Solutions (75-100 bps on ROE in 2024) is expected to improve in 2025 and 2026 as the Apple Card partnership moves towards profitability.

    07

    Regulatory Environment & Lawsuit

    Goldman Sachs, along with other major U.S. banks, filed a lawsuit against the Federal Reserve regarding the lack of transparency and consistency in CCAR stress testing. The firm believes a more transparent regulatory process is crucial for an efficient financial system and is hopeful for constructive dialogue given potential changes in administration and Fed leadership regarding CCAR, Basel III, and G-SIB calibration.

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