GS
Earnings call · Dec 2024 (Q4 FY24)

GOLDMAN SACHS GROUP Q4 FY24 earnings call 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

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

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

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 billion down 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 billion up 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 trillion record
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 billion exceeded 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

GreenSky Sale of GreenSky

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

General Motors Transition 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.

Various Sale of seller financing loans portfolio

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

Risks & headwinds

Regulatory Uncertainty next 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 Impact ongoing

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 Risks ongoing

Unquantified impact on market sentiment

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

Cyber Risk ongoing

Unquantified

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

Platform Solutions Drag on ROE 2025 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

M&A and IPO activity pickup

Throughout 2025
Current Meaningful pickup in large-cap M&A dialogue and sponsor inquiry, strong positive backlog trends.
Target Further 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

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 read 7 chapters

Detailed narrative

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.

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.

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.

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.

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.

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.

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.