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The stock price of The Goldman Sachs Group, Inc. (NYSE:GS), a global investment bank deemed a “Global Systemically Important Bank” (G-SIB), had been rising in the days leading up to and immediately after the result of its Q4/Fiscal Year (FY) 2024 earnings. While business line trends certainly have plenty of positives to justify this sentiment.
Trend AnalysisAs far as revenue generation goes, FY 2024 largely sees a consolidation of trends that manifested in FY 2022:
Websim is the retail division of Intermonte, the primary intermediary of the Italian stock exchange for institutional investors. Leverage Shares often features in its speculative analysis based on macros/fundamentals. However, the information is published in Italian. To provide better information for our non-Italian investors, we bring to you a quick translation of the analysis they present to Italian retail investors. To ensure rapid delivery, text in the charts will not be translated. The views expressed here are of Websim. Leverage Shares in no way endorses these views. If you are unsure about the suitability of an investment, please seek financial advice. View the original at
Source: Company Information; Leverage Shares analysis
Deal-making has been slipping away in prominence within the bank’s biggest breadwinner, its “Global Banking & Markets” (GBM) division. Within GBM, the market-facing Equities and FICC (“Fixed Income, Currency & Commodities”) segments now firmly account for half of the bank’s revenues. Even managing wealth for private clients – services provided by the “Asset & Wealth Management” (AWM) division – accounted for more revenue than advisory-driven investment banking.
The bank’s “Platform Solutions” division encompasses credit card issuances and point-of-sale financing solutions, which the bank has been offloading for over two years now. Most net revenues indicated, however, primarily reflected the mark-downs related to the GreenSky deal in the prior year period. The last remaining major piece of this division has been its partnership with Apple over Apple Cards that media reports1 suggest that Barclays and Synchrony Financial are both negotiating to take over. Goldman Sachs’ efforts to become “mostly” a bank for institutions and high-net-worth investors, therefore, are inching closer to completion.
Over on the costs side, operating expenses are at 3-year lows relative to revenues earned while profit margins are at 3-year highs. While neither revenues nor margins are close to FY 2021 levels, there is arguably some strength in assuming that FY revenues will reach FY 2021 levels next year.
Unlike the past couple of years, FY 2024 has shown strong and positive growth trends for both revenue as well as net earnings.
Source: Company Information; Leverage Shares analysis
Unlike most other companies, “tech stacks” and “platforms” have never been banks’ USP. Instead, it has always been about people; after all that’s said and done, compensation matters to retain people. It’s perhaps notable to see that, despite a revenue/earnings downturn seen in 2023, the bank maintained a slight uptrend in compensation unlike in the year prior. In FY 2024, a 16% increase in revenue resulted in a net 8% increase in compensation – all in all, this fact pattern is bound to both retain and attract talent in the year ahead.
In ConclusionAs deal-making activity slowed down while markets grew grown choppy and (at times) dysfunctional, the bank was able to monetize for its clientele even under such circumstances with its diversified talent base. With rates expected to remain high, challenges are expected to continue in the deal-making space. Despite this, the bank has remained the top M&A (“mergers and acquisitions”) advisor globally2 in both FY 2023 and FY 2024 with increasing year-on-year value. Even if FY 2025 proves to have more challenges, its long history in the industry will likely ensure that deal flows remain solid.
After two years of a slump in revenue growth preventing a return to FY 2021 highs, FY 2024’s results are a boost to the bank’s forward valuation. Financials, in general, had been a solid performer in the S&P 500 in the previous calendar year and it’s likely to continue attracting investor interest this year as well. All in all, it’s never a bad idea to allocate some capital to “value” stocks and Goldman Sachs can easily be considered as such.
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