Q4 2024 Earnings Summary
- Goldman Sachs anticipates tailwinds going into 2025, with expectations of increased capital markets activity and CEO confidence, leading to a more constructive environment and potential normalization or improvement over historical averages. , ,
- Strong performance and fundraising in Alternative Asset Management, with expectations to make progress towards the $1 billion annual incentive fee target in 2025 as the market environment improves and capital is deployed.
- Asset & Wealth Management is expected to grow management and other fees at high single digits over the next several years, supported by opportunities in wealth lending and scaling of flagship products in alternatives. ,
- Regulatory uncertainty and potential for increased capital requirements under CCAR, Basel III, and G-SIB could negatively impact Goldman's profitability. The CEO acknowledged that changes in administration and leadership at the Fed make it hard to predict future regulations, which could affect the firm's capital markets business.
- Challenges with Platform Solutions, including the Apple partnership, may continue to be a drag on return on equity (ROE). The CEO mentioned that while the Apple Card is improving towards profitability, there is uncertainty around its future contribution, and it may not be a long-term business for the firm.
- Uncertainty in policy initiatives and potential shifts in market sentiment due to geopolitical risks, changes in immigration, trade, tax, and energy policies, or cyber risks could negatively impact Goldman's business outlook. The CEO emphasized that the world is a complicated place with lots of uncertainties that could derail optimism for the business.
| Metric | YoY Change | Reason |
|---|---|---|
Total Revenue | +22.5% (from $11,318M in Q4 2023 to $13,869M in Q4 2024) | Higher total revenue reflects strong improvements across key segments relative to the previous period. Increases in investment banking and other principal transactions revenues contributed to a sizeable uplift, building on prior period challenges and non‐recurring expense impacts. |
Net Income | +239% (from $2,008M in Q4 2023 to $6,802M in Q4 2024) | The dramatic rise in net income is due to robust revenue growth combined with sharper cost management and improved margins. The reversal of previous impacts—such as high credit loss provisions and significant operating write‐downs—helped boost profitability considerably compared to the lower earning period. |
Operating Income (EBIT) | +133% (from $2,254M in Q4 2023 to $5,257M in Q4 2024) | Operating income improved significantly as higher revenues were coupled with an 8% decrease in operating expenses. The absence of large prior write‐downs (e.g., from GreenSky) and improved segment performance (e.g. equities intermediation) led to a much stronger core operating margin versus the previous period. |
Earnings Per Share (Basic) | +118% (from $5.53 in Q4 2023 to $12.09 in Q4 2024) | The rise in Basic EPS is driven by the substantial improvement in net income and favorable changes in share count dynamics from the previous period, where lower earnings due to high expenses depressed EPS. Enhanced operating performance this period translated into significantly higher per-share profitability. |
Asia Revenue | +87% (from $1,067M in Q4 2023 to $1,999M in Q4 2024) | Asia’s revenue growth is notable and reflects a strong regional rebound, likely influenced by higher net interest income and active investment banking business. This performance signals a turnaround compared to the subdued figures of the previous quarter. |
Investment Banking Revenue | +24% (from $1,653M in Q4 2023 to $2,056M in Q4 2024) | The Investment Banking segment experienced growth driven by significantly higher revenues in debt underwriting and supportive effects from equity secondary offerings. This marks an improvement relative to prior challenges where revenue sources from M&A advisory were offset by lower market activity. |
Other Principal Transactions | +44% (from $1,427M in Q4 2023 to $2,054M in Q4 2024) | Other Principal Transactions revenues rose substantially primarily due to higher net gains from equity investments and improved performance in derivative activities. This increase contrasts with the prior period where revenues were more muted, reflecting a turnaround in investment performance. |
| Metric | Period | Previous Guidance | Current Guidance | Change |
|---|---|---|---|---|
Return on Equity (ROE) | FY 2024 | no prior guidance | Targeting a mid-teens ROE | no prior guidance |
AWM Pre-tax Margin | FY 2024 | no prior guidance | Achieved mid-20s pretax margin target; aims higher | no prior guidance |
AWM Durable Revenue Growth | FY 2024 | no prior guidance | Expected to grow at a high single-digit pace | no prior guidance |
Incentive Fees | FY 2024 | no prior guidance | Anticipates a $1B annual run rate | no prior guidance |
Fundraising in Alternatives | FY 2024 | no prior guidance | Expects 2024 fundraising to exceed $60B | no prior guidance |
Management & Other Fees | FY 2024 | no prior guidance | On track to achieve a $10B annual target in 2024 | no prior guidance |
Capital Allocation | FY 2024 | no prior guidance | Maintaining a 90 basis point buffer above regulatory requirements | no prior guidance |
AWM Management & Other Fees Growth | FY 2025 | no prior guidance | Expected to grow at high single digits annually | no prior guidance |
Incentive Fees | FY 2025 | no prior guidance | Targeting $1B annually, with further progress expected in 2025 | no prior guidance |
Fundraising for Alternatives | FY 2025 | no prior guidance | Expected to remain consistent with $72B in 2024 | no prior guidance |
Tax Rate | FY 2025 | no prior guidance | Expected to be approximately 20% | no prior guidance |
Platform Solutions | FY 2025 | no prior guidance | Aiming for pre-tax breakeven | no prior guidance |
Asset & Wealth Management Returns | FY 2025 | no prior guidance | Committed to driving the business towards mid-teens returns | no prior guidance |
Operating Efficiency | FY 2025 | no prior guidance | 3-year program to manage expenses, optimize footprint, and leverage AI | no prior guidance |
| Topic | Previous Mentions | Current Period | Trend |
|---|---|---|---|
M&A activity and capital markets volumes | Below 10-year averages earlier but showing signs of recovery with pent-up demand and growing backlogs | Optimistic outlook, #1 in league tables, +24% IB fees, increased sponsor activity, strong backlog | Consistently mentioned, improving sentiment |
Asset & Wealth Management expansion | Steady growth in AUS and fees, improving margins, consistent inflows and fundraising, strong strategic focus | +16% YoY revenue, record $3.1T AUS, high single-digit fee growth expected, strong alternatives and private banking focus | Consistent focus, stable positive sentiment |
Alternative asset management and fundraising | Significant fundraising momentum ($50B+ in Q3, $36B in Q2, $14B in Q1), growing third-party commitments, robust pipelines | Raised $72B in 2024, expects more growth in 2025, diversifying asset classes, moving closer to $1B incentive fee target | Consistent growth, steady positive outlook |
Regulatory uncertainty (Basel III, CCAR, G-SIB) | Maintained buffer for Basel III endgame, expressed concerns over transparency and higher capital requirements, consistent advocacy efforts | Noted unpredictability in CCAR process, potential Fed changes, emphasis on lawsuit regarding stress tests, ongoing G-SIB calibration concerns | Consistently mentioned, uncertainty remains |
Platform Solutions and consumer initiatives (Apple partnership) | Discussed in Q1 and Q3 (narrowing consumer footprint), no mention in Q2; Apple Card and other partnerships contributed to mixed ROE impact | Apple Card performance improving, reducing ROE drag by 75–100 bps, business not core long-term, contract through 2030 | Mixed sentiment, consistently noted except Q2 |
Return on Equity (ROE) targets and performance | Ranged 10%–14.8% over Q1–Q3, consistent mid-teens target, impacted by consumer initiatives | 14.6% in Q4, 12.7% for full year, aiming for mid-teens, plan to reduce noncore drags from Platform Solutions | Consistently mentioned, trend toward improvement |
Private credit platform expansion | Highlighted across Q1–Q3, $130B–$140B in private credit assets, strong deal flow and fundraising | Emphasized private credit as a key structural trend; formed Capital Solutions group to integrate offerings | Consistent, significant growth focus |
AI-driven opportunities | Cited in Q1 and Q2 (productivity gains, client solutions); no mention in Q3 | Using AI for operational efficiency (engineering, client experience), freeing capacity for investment, impact not broken out separately | Growing emphasis, potentially large impact |
Slowing consumer revenue growth and underwriting adjustments | Introduced in Q2 (underwriting changes), mentioned in Q3 (scaling back consumer footprint) | No specific mention | Mentioned Q2/Q3 only, not repeated in Q4 |
Competition in trading | Addressed in Q1–Q3 (intense competition, scale advantage, durable franchise) | No specific mention | Mentioned previously, absent in Q4 |
Policy and geopolitical uncertainties (immigration, trade, tax, energy, cyber) | General geopolitical risks noted each quarter, including elections and inflation concerns | Cited broad policy risks (immigration, trade, tax, energy, cyber), potential impacts on sentiment and markets | Consistently present, changing detail levels |
CEO confidence and tailwinds going into 2025 | Positive outlook in Q2/Q3, not directly addressed in Q1 | Shift in CEO optimism post-election, sponsor backlog growth, improving environment expected in 2025 | Increasing optimism, potential major impact |
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Regulatory Outlook and Capital Impact
Q: How will regulations affect capital markets business?
A: David Solomon noted that while it's hard to speculate, there could be constructive discussions about improving transparency and consistency around capital regulations, which would be very good for the system and capital markets. He mentioned the industry's belief that CCAR isn't working appropriately, and changes in administration might lead to a different approach to Basel III. , -
Path to Mid-Teens ROE
Q: What's the plan to reach 15% ROE?
A: David Solomon explained that focusing on Global Banking & Markets and Asset & Wealth Management will drive mid-teens returns. Improving Asset & Wealth Management returns through scaling and freeing up capital from legacy investments, and reducing the 75 to 100 basis point ROE drag from Platform Solutions will help achieve mid-teens ROE. -
Platform Solutions Drag on ROE
Q: How will Platform Solutions' ROE drag improve?
A: The primary focus is on the Apple partnership within Platform Solutions. The Apple Card continues to improve performance, driving toward profitability. This improvement will reduce the ROE drag in 2025 and 2026. Ultimately, Platform Solutions will not be a long-term business for the firm, allowing them to exit and return capital. -
Capital Return and Investment Balance
Q: How will you balance capital returns with investment opportunities?
A: Denis Coleman stated they have 130 basis points of capital cushion and see opportunities to deploy capital to support clients and invest in the business. They are committed to sustainably growing the dividend and returning excess capital to shareholders. In 2024, they returned record levels of capital while growing the firm. -
Operating Efficiencies and Margins
Q: How will expenses and efficiencies affect margins in 2025?
A: Denis Coleman said they aim to scale the firm and deliver incremental operating leverage. In 2024, the efficiency ratio improved by 1200 basis points to about 63%, moving closer to their 60% target. They plan to fund investments by driving efficiencies across the firm, focusing on spend processes and accountability. -
Alternative Asset Management Growth
Q: What's the outlook for alts fundraising and performance fees?
A: Denis Coleman mentioned they've had success in fundraising across various asset classes, surpassing targets. They expect to continue raising funds with similar fee structures. As the environment improves, deployment will increase, leading to growth in AUS and performance fees. They aim to make progress toward their $1 billion annual incentive fee target in 2025. , -
Sponsor Activity and Market Share
Q: How will you increase market share with sponsor clients?
A: David Solomon said they have leading share with sponsors and expect a more constructive environment for sponsor activity in the next 24 months. Organizational changes, such as forming the Capital Solutions group, will strengthen their position to capture more than their fair share of activity. , -
Lending Growth in Wealth Management
Q: What's the plan for lending growth in wealth management?
A: Denis Coleman noted they are relatively underpenetrated in lending within wealth management. They grew private wealth lending balances by $5 billion in 2024 and are committed to increasing penetration over multiple years, seeing significant room for improvement. -
Strategic Acquisitions in Alts and Wealth
Q: Any thoughts on acquisitions to accelerate growth?
A: David Solomon acknowledged they consider opportunities, especially in Asset & Wealth Management. However, the bar for doing deals is high, and they are focused on organic execution. He noted that these businesses are sold, not bought, and market valuations are high. -
Risks to Positive Outlook
Q: What risks could derail the optimistic outlook?
A: David Solomon emphasized that while the current environment is constructive, uncertainties exist such as policy changes, geopolitical events, and potential shifts in market sentiment. The firm is focused on risk management and prepared for unexpected changes. , -
Use of AI and Operational Efficiency
Q: When will AI impact earnings?
A: David Solomon stated they are having early success with AI and are focused on making the firm more productive. While not specifying an exact impact on earnings, they continue to use technology to improve efficiency and serve clients better. -
Platform Solutions Strategy
Q: Why is Platform Solutions still around?
A: David Solomon reiterated they have a journey around consumer platforms. The firm continues to improve the Apple Card's performance, working towards reducing the drag. Ultimately, Platform Solutions will not be a long-term business for the firm. ,
Research analysts covering GOLDMAN SACHS GROUP.