- Net Revenues: $12.7 billion for Q2 2024.
- Net Earnings: $3 billion for Q2 2024.
- Earnings Per Share (EPS): $8.62 for Q2 2024.
- Return on Equity (ROE): 10.9% for Q2 2024.
- Return on Tangible Equity (ROTE): 11.6% for Q2 2024.
- Global Banking and Markets Revenues: $8.2 billion for Q2 2024, up 14% year-over-year.
- Advisory Revenues: $688 million, up 7% year-over-year.
- Equity Underwriting Revenues: $423 million, up 25% year-over-year.
- Debt Underwriting Revenues: $622 million, up 39% year-over-year.
- FICC Net Revenues: $3.2 billion, up 17% year-over-year.
- Equities Net Revenues: $3.2 billion, up 7% year-over-year.
- Asset Wealth Management Revenues: $3.9 billion, up 27% year-over-year.
- Management and Other Fees: $2.5 billion, a record high.
- Private Banking and Lending Revenues: $707 million.
- Assets Under Supervision (AUS): $2.9 trillion, a record high.
- Alternative AUS: $314 billion.
- Net Interest Income: $2.2 billion for Q2 2024.
- Provision for Credit Losses: $282 million for Q2 2024.
- Total Operating Expenses: $8.5 billion for Q2 2024.
- Effective Tax Rate: 21.6% for the first half of 2024.
- Shareholder Returns: $4.4 billion returned, including $929 million in dividends and $3.5 billion in stock repurchases.
- Quarterly Dividend Increase: 9%, to $3 per share starting Q3 2024.
Release Date: July 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) delivered strong year-on-year growth in global banking, markets, and asset wealth management.
- The company produced a 10.9% ROE for the second quarter and a 12.8% ROE for the first half of the year.
- Assets under supervision hit a record of $2.9 trillion, with total wealth management client assets rising to roughly $1.5 trillion.
- The company raised $36 billion in alternatives year to date, with expectations to exceed $50 billion in fundraising for the year.
- The Board approved a 9% increase in the quarterly dividend, reflecting confidence in the durability of the franchise.
Negative Points
- Despite the positive performance, the ROE of 10.9% for the second quarter is still below the company's target of 15%.
- The investment banking activity levels are still significantly below 10-year averages, impacting overall performance.
- The year-over-year increase in the stress capital buffer does not reflect the strategic evolution of the business, leading to engagement with regulators.
- The company plans to moderate share buybacks due to higher than expected SCB requirements.
- The asset wealth management segment's ROE is still around 10%, which is below the desired level.
Q & A Highlights
Q: Does the high demand for committed acquisition financing indicate an inflection point in private equity-related M&A? How significant is Goldman Sachs' position with its private credit platform?
A: David Solomon, CEO: We see momentum picking up in M&A, although activity levels are still below 10-year averages. Sponsor activity is starting to accelerate, and we expect this trend to continue into 2025. Goldman Sachs is well-positioned with its leading leveraged finance activity and powerful direct lending private credit platform.
Q: How does the recent increase in the stress capital buffer (SCB) impact your business, particularly in financing? Will buybacks be moderated?
A: Denis Coleman, CFO: We have the capacity to continue deploying capital into the client franchise and returning capital to shareholders. Despite the higher SCB, we plan to moderate buybacks but maintain flexibility. We will dynamically manage our capital to support our clients and maintain a prudent buffer.
Q: What drove the equity investment gains in the quarter, particularly in real estate?
A: Denis Coleman, CFO: The gains were primarily due to the absence of significant markdowns seen in the prior year period. We had previously addressed commercial real estate risks, and the current quarter's results reflect a more stable performance.
Q: How are you managing expenses given the current environment and the pickup in revenues?
A: Denis Coleman, CFO: We are accruing compensation in line with the firm's performance and the competitive market for talent. We aim to generate incremental operating leverage as revenues grow, particularly with the expected pickup in M&A activity.
Q: Can you elaborate on the competitive landscape in banking and markets? How is Goldman Sachs positioned?
A: David Solomon, CEO: Investment banking and trading are always competitive. Our integrated One GS approach is highly competitive, and we have maintained leading positions in M&A and capital raising for decades. We continue to invest in our debt franchises and trading businesses, positioning us well to serve our clients globally.
Q: How is Goldman Sachs implementing artificial intelligence (AI) to improve productivity and efficiency?
A: David Solomon, CEO: AI tools are being used to increase productivity across various areas, such as equity research, investment banking, and data analysis. These tools allow our highly skilled employees to focus more on client interactions and strategic tasks, enhancing overall efficiency.
Q: What is the outlook for on-balance sheet investments, and how do you plan to reduce these exposures?
A: Denis Coleman, CFO: We continue to reduce on-balance sheet exposures, with a target to sell down the majority by the end of 2026. We expect to make further progress in the third and fourth quarters of this year and into 2025.
Q: How should we think about the growth potential and margin profile of the alternatives (alts) business within asset and wealth management (AWM)?
A: Denis Coleman, CFO: The alts business presents significant opportunities for margin improvement as we develop incremental scale by strategy. We expect continued growth in AWM, with alts being a key contributor to improving the overall return profile.
Q: How are you managing capital given the uncertainty around Basel III Endgame and the recent SCB increase?
A: Denis Coleman, CFO: We are maintaining a prudent buffer to address regulatory uncertainties. Our current capital levels provide flexibility to support clients and return capital to shareholders while managing potential future regulatory changes.
Q: What are the key drivers behind the record financing revenues in FICC and equities?
A: Denis Coleman, CFO: The growth in financing revenues is driven by disciplined capital deployment and supporting clients' growth. We remain committed to growing durable revenue streams across FICC and equities, leveraging our strong client relationships and market position.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
