No bad stock

The Goldman Sachs Group, Inc.
CEO : Mr. David Solomon

Quarterly earnings growth(YoY,%)

Period	Revenue	Operating Income	EPS	Release Date
2022 Q4	-16.2% YoY	90.2%	-69.4%	2023-01-17

Denis Coleman says,

Financial Performance

• The firm generated net revenues of $47.4 billion, net earnings of $11.3 billion, and earnings per share of $30.06 in 2022.
• Global Banking and Markets generated revenues of $32.5 billion for the year, down 12% due to a steep decline in investment banking fees.
• FICC net revenues were $2.7 billion in the quarter, up 44% year-on-year.
• Asset & Wealth Management revenues of $13.4 billion were down 39% year-over-year due to a steep decline in revenues from equity and debt investments.
• Alternative AUS totaled $263 billion at the end of the fourth quarter, driving $492 million in management and other fees for the quarter and $1.8 billion for the year.

Market Trends

• Clients are focused on stability and financial conditions, pushing out the timing of transactional activity.
• We are seeing some positive signs of activity, particularly in investment-grade markets, which have had a strong start to the year in both the United States and Europe.
• Provisions were driven by continued portfolio growth, net charge-offs, and a worsening of our baseline scenario.

Expenses and Efficiency

• Compensation expenses fell 15% despite a 10% increase in headcount and were partially offset by higher non-compensation expenses.
• The increase in non-compensation expenses was primarily related to acquisitions, transaction-based costs, and continued investments in technology.
• We are actively engaged in expense mitigation efforts, including targeted reductions across communications and technology spend, professional fees, and advertising costs, as well as the recent headcount reduction exercise.

Capital and Dividends

• The firm’s common equity Tier 1 ratio was 15.1% at the end of the fourth quarter under the standardized approach, up 80 basis points sequentially, representing a 130 basis point buffer to our new capital requirement of 13.8%.
• The firm returned $2.4 billion to shareholders in the fourth quarter, including common stock repurchases of $1.5 billion and common stock dividends of $880 million.

Outlook

• The firm remains focused on executing its strategic priorities and creating value for its shareholders.
• The firm intends for 2023 issuance to run significantly below 2022 levels, though it will remain dynamic with respect to business needs and market opportunities.

David Solomon says,

Financial Performance

• Generated revenues of $10.6 billion and net earnings of $1.3 billion and earnings per share of $3.32
• After nine straight quarters of double-digit returns, Q4 2022 performance was disappointing due to near-term challenges in operating environment

Challenging Operating Environment

• Underwriting volumes remained extremely muted
• Thicken equity activities, activity levels dropped after a busy and volatile year for many clients
• Higher loan loss provision and expenses
• Central Bank rate increases have started to have an impact on inflation, but they are also lowering the growth trajectory of the economy

Expense Reduction Efforts

• Reduced the size of balance sheet, further optimized and reduced RWA footprint and managed down G-SIB score to hit 3% target
• Started firm-wide expense reduction efforts to offset inflationary pressures and right-size the firm for the current environment
• Conducted a 6% headcount reduction exercise earlier this month, which impacted dedicated and talented individuals

Strategic Actions

• Completed reorganization to further strengthen core businesses, help scale growth platforms and improve efficiency
• Narrowed ambitions on consumer strategy and made some key decisions
• Started a process to cease offering new loans on the Marcus platform
• Postponed the launch of checking product to strengthen deposit franchise, card partnerships and GreenSky

Key Priorities

• Growing management fees in asset and wealth management business
• Maximizing wallet share and growing financing activities in global banking and markets business
• Scaling platform solutions to deliver profitability

Q & A sessions,

Asset Management Performance Improvement

• Goldman Sachs has made progress on reducing their balance sheet and asset management, but still has a significant asset management balance sheet larger than they would like to have.
• Reduced the asset management balance sheet by $9 billion this past year and intend to continue reducing it.
• The disruption in asset prices and the density of that balance sheet impacted its performance in the fourth quarter, earning zero.
• Normalization in capital markets activities and a more balanced environment with respect to the asset management balance sheet would have a big impact.

Shift to Client-Oriented Fee-Based Business

• The shift from a balance sheet intensive asset management business to a client-oriented fee-based business has been a big part of their strategy over the last 3 years.
• Continued growth in asset and wealth management, financing growth in core Global Banking and Markets business, and operating profitably on their platforms should make the business more resilient.
• Their wealth business overall grew nicely during the course of 2022.

Narrowed Focus on Certain Things in Consumer Business

• Goldman Sachs has narrowed their focus on certain things in consumer business and shifted their strategy to a more cogent path forward.
• Their partnership with Apple will provide meaningful dividends for the firm over time.
• GreenSky is a good business that can be accretive, but the platforms are in a different stage of development than their other businesses.
• They are making progress and will continue to run a narrow focus in a way that they think can drive profitability.

Strong Performance of Investment Banking and Markets Business

• The core of the firm is very strong, and their wallet shares are strong, but they still see more opportunity and are laser-focused on continuing to execute on it.
• Their relative M&A revenue performance, FICC performance and equities performance in a tough quarter looked pretty good.
• Their combined banking and markets business is a leader, outperforming in terms of its market share and returns relative to competitors.

Adjustments and Pivots in Strategy

• Goldman Sachs tried to do too much too quickly in the past, affecting their execution.
• They have made adjustments and narrowed their focus on three core things that they actually think are good businesses.
• They are willing to change and pivot when needed.