Goldman Sachs Group Inc. — 2023 Form 10-K Summary
Business context and reporting period
The filing covers the fiscal year ended December 31, 2023; it is an annual report rather than a standalone fourth-quarter filing. Goldman Sachs is a global financial institution serving corporations, financial institutions, governments and individuals through three segments: Global Banking & Markets, Asset & Wealth Management, and Platform Solutions.
Management described 2023 as a year of persistent inflation and geopolitical uncertainty, banking-sector stress early in the year, pressure in commercial real estate, and improving market sentiment later in the year as inflation moderated and expectations for a U.S. soft landing increased.
Financial performance and key metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Net revenues | $46.254 billion | $47.365 billion | Down 2% |
| Pre-tax earnings | $10.739 billion | $13.486 billion | Down 20% |
| Net earnings | $8.516 billion | $11.261 billion | Down 24% |
| Net earnings applicable to common | $7.907 billion | $10.764 billion | Down 27% |
| Diluted EPS | $22.87 | $30.06 | Down 24% |
| ROE | 7.5% | 10.2% | Down 270 bps |
| ROTE | 8.1% | 11.0% | Down 290 bps |
| Efficiency ratio | 74.6% | 65.8% | Up 880 bps |
| Provision for credit losses | $1.028 billion | $2.715 billion | Down 62% |
| Operating expenses | $34.487 billion | $31.164 billion | Up 11% |
| Effective tax rate | 20.7% | 16.5% | Up 420 bps |
Net interest income declined 17% to $6.351 billion. Interest income rose sharply to $68.515 billion, but interest expense increased even more substantially to $62.164 billion as rates and funding costs rose.
Cash and cash equivalents were $241.577 billion at year-end, essentially unchanged from $241.825 billion in 2022. Net cash used in operating activities was $12.587 billion, net cash used in investing activities was $17.312 billion, and net cash provided by financing activities was $27.800 billion.
Total assets increased 14% to $1.642 trillion, while total liabilities increased to $1.525 trillion. Shareholders’ equity was $116.905 billion. Unsecured long-term borrowings were $241.877 billion, unsecured short-term borrowings were $75.945 billion, deposits were $428.417 billion, and collateralized financings were $323.564 billion.
Average daily liquidity metrics remained above regulatory minimums: fourth-quarter average LCR was 128% versus a 100% minimum, and fourth-quarter average NSFR was 116% versus a 100% minimum. Average global core liquid assets for 2023 were $406.998 billion.
Year-end CET1 capital ratios were 14.4% under the Standardized Capital Rules and 14.9% under the Advanced Capital Rules. The firm’s Tier 1 leverage ratio was 7.0% and its supplementary leverage ratio was 5.5%.
Segment results and material changes
- Global Banking & Markets: Net revenues declined 8% to $29.996 billion and pre-tax earnings declined 18% to $11.555 billion. Investment banking fees fell 16% to $6.216 billion, primarily because of lower advisory revenue and weaker completed mergers and acquisitions activity. FICC revenue declined 18% to $12.060 billion, while Equities revenue increased 5% to $11.549 billion, supported by equity financing and prime financing.
- Asset & Wealth Management: Net revenues increased 4% to $13.880 billion and pre-tax earnings increased 4% to $1.359 billion. Management and other fees increased with higher average assets under supervision. Period-end assets under supervision rose to $2.812 trillion from $2.547 trillion, including $101 billion of net inflows and $187 billion of market appreciation. Commercial real estate impairments within consolidated investment entities contributed to higher expenses.
- Platform Solutions: Net revenues increased 58% to $2.378 billion, but the segment remained unprofitable, with a $2.175 billion pre-tax loss versus a $1.989 billion loss in 2022. Credit card balances drove revenue growth, but operating expenses included a $506 million GreenSky intangible-asset write-down and a $504 million Consumer platforms goodwill impairment.
Operating expenses were also affected by $1.46 billion of commercial real estate impairments, a $529 million FDIC special assessment fee, and higher depreciation and amortization. Headcount declined 7% to 45,300 at year-end, primarily reflecting a headcount reduction initiative.
The firm returned $9.39 billion to common shareholders in 2023, including $5.80 billion of share repurchases and $3.59 billion of common dividends. The board authorized up to $30 billion of repurchases in February 2023. The common dividend declared per share increased to $10.50 from $9.00.
Guidance, outlook, risks and unusual items
- Management targets through-the-cycle ROE of 14% to 16% and ROTE of 15% to 17%, compared with 2023 ROE of 7.5% and ROTE of 8.1%.
- Asset & Wealth Management targets more than $10 billion of annual management and other fees in 2024, including more than $2 billion from alternatives. It also targets medium-term pre-tax margins in the mid-twenties and ROE in the mid-teens.
- Platform Solutions targets pre-tax profitability by the end of 2025.
- The firm expects an approximately 22% effective tax rate for 2024, including the anticipated impact of Pillar II taxes, based on current interpretations and enacted legislation.
- Goldman Sachs entered into an agreement to sell GreenSky, expected to close in the first quarter of 2024, and sold a majority of the GreenSky installment loan portfolio. It also completed the sale of substantially all of the Marcus loan portfolio, sold its Personal Financial Management business, and began a process to transition the GM credit-card program to another issuer.
- The firm plans to reduce historical principal investments in Asset & Wealth Management to less than $15 billion by the end of 2024 and exit the portfolio over the medium term. The balance declined from $29.7 billion to $16.3 billion during 2023.
- Management preliminarily estimates that proposed U.S. Basel III capital rules, if adopted as proposed and applied to a balance sheet similar to December 2023, could increase regulatory capital requirements by approximately 25% on a fully phased-in basis. The proposal is not final.
- Key risks include market volatility, weaker investment-banking activity, commercial real estate deterioration, consumer credit losses, funding and liquidity stress, credit-rating downgrades, cybersecurity and operational failures, legal and regulatory proceedings, geopolitical conflicts, climate-related risks, competition, and execution risk related to the consumer-business exits.
- The firm reported approximately $2.1 billion as the upper end of the reasonably possible aggregate litigation loss range in excess of reserves for matters where a range could be estimated. Management stated that other proceedings were not expected to have a material adverse effect on financial condition, although individual-period earnings impacts could be material.
- The 1MDB-related guarantee requires Goldman Sachs to ensure that Malaysia receives at least $1.4 billion in specified assets and proceeds. Arbitration with Malaysia remained ongoing at year-end.
- Management concluded that internal control over financial reporting was effective as of December 31, 2023, and the independent auditor issued unqualified opinions on the financial statements and internal controls.
Important facts for investors to verify
- Whether revenue and profitability recover toward management’s 2024 and medium-term ROE, ROTE and efficiency targets.
- The pace and economics of the GreenSky sale, remaining GreenSky loan dispositions, and transition of the GM card program.
- Platform Solutions’ credit-card growth, charge-offs, allowance coverage and path to profitability by 2025.
- Commercial real estate exposure, impairments, nonaccrual loans and potential further valuation pressure.
- Investment banking backlog and actual completed advisory, equity-underwriting and debt-underwriting activity.
- The sustainability of Asset & Wealth Management inflows, fee rates, alternative-asset fundraising and planned principal-investment reductions.
- The final form and implementation impact of proposed Basel III rules, including potential capital-ratio and capital-distribution constraints.
- Liquidity under stress, deposit behavior, collateral requirements, debt maturities and the potential impact of a one- or two-notch credit-rating downgrade.
- Developments in the 1MDB arbitration, CFPB consumer investigations and other litigation and regulatory matters.
- The sensitivity of earnings and capital to market volatility, interest rates, credit spreads, consumer delinquencies and geopolitical events.