In Q3 2024, Goldman reported total revenues of $12.7 billion - 7% higher than the figure a year ago. The increase was driven by higher investment banking fees, as both the debt and equity underwriting markets picked up. Earnings stood at $8.40 per share, up 54% from last year.
Below are key drivers of Goldman Sachs' value that present opportunities for upside or downside to the current Trefis price estimate for the company's stock:
For additional details, select a driver above or a division from the interactive Trefis split for Goldman Sachs at the top of the company page.
Goldman Sachs is a leading global financial services firm with offices in over 30 countries. The company offers investment banking, securities, and investment management services to corporate, institutional, government, and high-net-worth individual clients.
The average yield for Goldman's equity trading business over 2017-22 was 10% - compared to a figure of 3.8% for the FICC business over the same period. As a result, equity trading revenues were 75% of the FICC revenues in 2022, despite the equity trading desk being one-fourth of the size of the FICC trading unit in terms of trading portfolio size.
Goldman's assets under management (AUM) have seen significant growth over the last decade as the banking giant looks for ways to improve profitability even as its cornerstone trading business remains prone to high volatility. Goldman will likely have to focus more on its asset management business as new regulations begin to restrict proprietary trading and risk-taking, which is why we see the division as a significant value driver for the company. The bank is also pushing its online loans-and-deposits services to diversify its presence in the U.S. financial services space.
With the GDP of many emerging markets, such as China and Brazil, growing rapidly, there is an increasing demand for capital from companies in these markets to support expansion. Additionally, with the integration of these markets into the global economy, there is a shift in these countries from family-run businesses to global corporations. Accordingly, there is an increasing number of companies going public or raising debt capital, driving demand for equity underwriting and debt origination services. Consolidation across different sectors has also been driving demand for M&A advisory services.
Goldman Sachs is a leader in the global investment banking space, with the bank ranking among the top three in the global M&A industry for nearly every single quarter over the last decade.
The Volcker Rule restricts banks from making certain kinds of speculative investments if they are not on behalf of their customers. Goldman's proprietary trading desks accounted for a sizable percentage of earnings before the downturn, and the Volcker Rule stopped these revenues. Although the Trump administration can potentially dilute the Volcker rule restrictions, the timing and effectiveness of proposed changes remain to be seen.
Investors' desire to regain losses during the recession could stimulate investments in multi-asset, alternative, and equity products. At the same time, signs of a broad-based recovery in the real estate market would improve prospects for alternative investments.
Long-term trends, including the ongoing shift from state pension dependency to private retirement funding, aging populations in mature markets, and growing wealth in emerging economies, will also positively impact assets under management.
