- Net Revenues: $14.2 billion.
- Net Earnings: $4.1 billion.
- Earnings Per Share (EPS): $11.58.
- Return on Equity (ROE): 14.8%.
- Return on Tangible Equity (ROTE): 15.9%.
- Global Banking & Markets Revenue: $9.7 billion with an 18% ROE.
- Advisory Revenues: $1 billion, #1 in M&A league tables.
- Equity Underwriting Revenues: $370 million.
- Debt Underwriting Revenues: $699 million.
- FICC Net Revenues: $4.3 billion.
- Equities Net Revenues: $3.3 billion.
- Asset & Wealth Management Revenues: $3.8 billion, 18% higher year-over-year.
- Management and Other Fees: Record $2.5 billion.
- Incentive Fees: $88 million.
- Private Banking and Lending Revenues: $682 million.
- Equity and Debt Investments Revenues: $567 million.
- Assets Under Supervision: Record $2.8 trillion.
- Long-term Net Inflows: $24 billion, mainly in fixed income.
- Alternative Assets Under Supervision: $296 billion.
- Third-party Fundraising: $14 billion in the quarter.
- Platform Solutions Revenues: $698 million.
- Firmwide Net Interest Income: $1.6 billion.
- Total Loan Portfolio: $184 billion.
- Provision for Credit Losses: $318 million.
- Operating Expenses: $8.7 billion, efficiency ratio of 60.9%.
- Compensation Ratio: 33% net of provisions.
- Non-compensation Expenses: $4.1 billion.
- Effective Tax Rate: 21.1% for the quarter, expected 22% for the full year.
- Common Equity Tier 1 Ratio: 14.7%.
- Capital Return to Shareholders: $2.4 billion, including stock repurchases of $1.5 billion and dividends of $929 million.
Release Date: April 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Goldman Sachs Group Inc (GS, Financial) reported strong first quarter results, reflecting the strength of interconnected franchises and the firm's earnings power.
- Assets under supervision in Asset & Wealth Management rose to a record $2.8 trillion, marking the 25th consecutive quarter of long-term fee-based net inflows.
- The Goldman Sachs Group Inc (GS) is at the forefront of advising clients on AI and potential use cases, positioning the firm to benefit from AI-related infrastructure demand.
- Net revenues were $14.2 billion and net earnings were $4.1 billion, resulting in an ROE of 14.8% and an ROTE of 15.9%.
- The Goldman Sachs Group Inc (GS) has a diversified platform across public and private markets, delivering solid performance across asset classes.
Negative Points
- The Goldman Sachs Group Inc (GS) is mindful of headwinds including concerns around inflation, the commercial real estate market, and escalating geopolitical tensions.
- The Goldman Sachs Group Inc (GS)'s backlog fell quarter-on-quarter as transactions were brought to market, though client engagement remains robust.
- The Goldman Sachs Group Inc (GS) is operating in a complex environment, with the timing of a broader reopening of the capital markets remaining uncertain.
- The Goldman Sachs Group Inc (GS) is still in the early stages of a reopening of the capital markets, which may impact the pace of recovery in transaction volumes.
- The Goldman Sachs Group Inc (GS) is adjusting its transaction banking ambitions, narrowing its focus from a global scale to primarily the U.S. and Europe.
Q & A Highlights
Q: What can continue to stick from the strong revenue across the board in 1Q?
A: (David Solomon - Chairman & CEO) We've made significant progress in building a more durable business. We're focused on growing our financing business in markets, doubling our management fees in Asset & Wealth Management, and improving the client franchise. We're well-positioned to capture market opportunities and continue to focus on executing and enhancing that position.
Q: Can you talk about the non-comp piece and whether the decrease is a run rate level going forward?
A: (Denis P. Coleman - CFO) We've been focused on containing the growth of non-comp expenses. There were items last year we didn't expect to repeat, so this quarter is more normalized. We'll continue to manage non-comp expenses in a disciplined fashion.
Q: Can you provide perspectives on AI's impact on capital markets, IB, and Goldman Sachs' efficiency?
A: (David Solomon - Chairman & CEO) AI requires infrastructure and financing, creating a runway of opportunity for us with our clients. For Goldman Sachs, we see opportunities for productivity gains and efficiency. We're focused on enhancing productivity, particularly for our developers, and applying AI in our operations.
Q: How should shareholders think about strategy around growing the asset management revenues? Is inorganic growth part of the strategy?
A: (David Solomon - Chairman & CEO) We're executing on organic growth with high single-digit growth, margin improvement, and less capital density. We're focused on performance, client experience, and fundraising. Inorganic growth could be interesting in the future, but our current focus is on what we have in front of us.
Q: How would you characterize this quarter's 18% ROE for Global Banking & Markets? Is it sustainable?
A: (David Solomon - Chairman & CEO) It was a strong quarter, but not what we expect to be an average quarter. We think this is a mid-teens business through the cycle. The performance this quarter was higher, but we view it as a very strong quarter and not the average run rate.
Q: What's driving the 9% organic growth in wealth management AUS?
A: (David Solomon - Chairman & CEO) We're focused on our ultra high net worth platform, which is best-in-class and has room to grow. We offer a diversified platform with access to alternative solutions and products, which is attractive to clients.
Q: Was there anything unique about the opportunity set in equities and fixed income that enabled strong trading revenues without impacting VaR?
A: (Denis P. Coleman - CFO) The revenue generation was broad-based, with good opportunities to risk-intermediate across geographies and asset classes. The benign operating environment provided a tailwind to our performance.
Q: How are you able to deliver alts in a unique way to the wealth platform?
A: (David Solomon - Chairman & CEO) We offer an open platform with access to Goldman Sachs proprietary funds and third-party alternative solutions, which is differentiated and attractive to wealth clients.
Q: What are you seeing among the sponsor cohort and when might we see a ramp in announcements from the sponsor side?
A: (David Solomon - Chairman & CEO) Sponsor activity is picking up, with more engagement in the first quarter. The LP community is putting pressure on sponsors to return capital, and we expect the pace to pick up in the coming quarters.
Q: What's happening with alts revenue and AUS?
A: (Denis P. Coleman - CFO) The movement in AUS is due to fundraising, deployment, and market conditions. We expect to reach our target of $1 billion in annual incentive fees over the medium term, supported by an estimated $3.8 billion of unrecognized incentive fees.
Q: What's the status of transaction banking, given the closure in Japan and focus on the U.S. and Europe?
A: (David Solomon - Chairman & CEO) We're committed to transaction banking but have narrowed our ambitions due to execution challenges and regulatory changes. We're focused on profitable growth and making adjustments as needed.
Q: What's the outlook for the financing business in markets given the uncertainty around Basel III?
A: (Denis P. Coleman - CFO) We expect client demand for financing to remain high, and we'll make adjustments to pricing or business mix as needed based on the final regulation.
Q: How should we think about buyback activity given the capital flexibility and Basel III developments?
A: (Denis P. Coleman - CFO) Our capital deployment hierarchy starts with supporting our client franchise. After that, we focus on a sustainable and growing dividend, and then return of capital through buybacks.
