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Goldman Sachs Group Inc GS

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Morningstar’s Analysis

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Lower Investment Gains Weighed on a Relatively Strong Quarter for Goldman Sachs

Michael Wong, CFA, CPA Sector Director

Analyst Note

| Michael Wong, CFA, CPA |

Goldman Sachs’ net revenue remained fairly strong in the third quarter, and it recently announced two acquisitions that will incrementally improve its mix of relatively stable earnings. The company reported net income to common shareholders of $5.3 billion, or $14.93 per diluted share, on $13.6 billion of net revenue. Net revenue sequentially decreased 12% with about all of the decrease attributable to principal transaction revenue that was $1.6 billion in the quarter compared with $4.3 billion in the second quarter. Equity investments revenue that is part of principal transactions was a record $3.7 billion in the second quarter, but some public investments of Goldman Sachs suffered in the recent quarter and public equity investment revenue came in at a loss of $820 million compared with a gain of $780 million in the second quarter. Outside of principal transaction revenue, Goldman Sachs’ other revenue lines were sequentially up or flat compared with the second quarter. The company’s quarterly investment banking revenue had its second best quarter ever, including record revenue in financial advisory, and had record revenue in its consumer and wealth management segment. We don’t anticipate making a material change to our $356 fair value estimate for narrow-moat Goldman Sachs.

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Company Profile

Business Description

Goldman Sachs is a leading global investment banking firm whose activities are organized into investment banking (20% of net revenue), global markets (40%), asset management (25%), and consumer and wealth management (15%) segments. Approximately 60% of the company's net revenue is generated in the Americas, 15% in Asia, and 25% in Europe, the Middle East, and Africa. In 2008, Goldman reorganized itself as a financial holding company regulated by the Federal Reserve System.

200 West Street
New York, NY, 10282
T +1 212 902-1000
Sector Financial Services
Industry Capital Markets
Most Recent Earnings Jun 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 40,500