Goldman Sachs Group Inc. — Q1 2024 Form 10-Q Summary
Business context and reporting period
The filing is an unaudited quarterly report for the three months ended March 31, 2024, compared primarily with the three months ended March 31, 2023 and, for balance-sheet data, December 31, 2023. Goldman Sachs operates through Global Banking & Markets, Asset & Wealth Management, and Platform Solutions.
Key financial metrics
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total net revenues | $14.213 billion | $12.224 billion | +16% |
| Pre-tax earnings | $5.237 billion | $3.993 billion | +31% |
| Net earnings | $4.132 billion | $3.234 billion | +28% |
| Net earnings applicable to common | $3.931 billion | $3.087 billion | +27% |
| Diluted EPS | $11.58 | $8.79 | +32% |
| ROE | 14.8% | 11.6% | +320 bps |
| ROTE | 15.9% | 12.6% | +330 bps |
| Efficiency ratio | 60.9% | 68.7% | Improved |
| Provision for credit losses | $318 million | $(171) million benefit | Unfavorable $489 million swing |
| Operating expenses | $8.658 billion | $8.402 billion | +3% |
Implied net margin was approximately 29.1% and pre-tax margin approximately 36.9% in Q1 2024, based on reported net revenues and earnings. Investment banking revenue increased 32% to $2.085 billion, investment management revenue increased 9% to $2.491 billion, market-making revenue increased 10% to $5.992 billion, and other principal transactions increased to $960 million from $55 million. Net interest income declined 10% to $1.608 billion as interest expense grew faster than interest income.
Segment performance
- Global Banking & Markets: Net revenues increased 15% to $9.726 billion; pre-tax earnings rose 21% to $4.477 billion; ROE increased to 18.0% from 16.6%. Investment banking, FICC, and Equities all improved.
- Asset & Wealth Management: Net revenues increased 18% to $3.789 billion; pre-tax earnings increased 43% to $877 million; ROE increased to 9.9% from 5.7%. Results benefited from higher management fees, equity investment gains, and the absence of the prior-year Marcus loan portfolio markdown.
- Platform Solutions: Net revenues increased 24% to $698 million, but the segment remained loss-making, with a pre-tax loss of $117 million versus a $306 million loss in Q1 2023. Management continues to target pre-tax profitability by the end of 2025.
Cash flow, balance sheet, debt and liquidity
- Cash and cash equivalents declined $32.2 billion during the quarter to $209.4 billion. Operating cash flow was negative $28.0 billion, investing cash flow was negative $8.0 billion, and financing cash flow was positive $7.2 billion.
- Total assets increased to $1.698 trillion from $1.642 trillion at year-end 2023, principally from higher trading assets, customer receivables, and collateralized agreements.
- Deposits increased to $440.7 billion from $428.4 billion. Collateralized financings increased to $348.8 billion. Unsecured borrowings totaled $312.5 billion, including $78.6 billion short-term and $233.9 billion long-term borrowings.
- Shareholders’ equity increased to $118.5 billion from $116.9 billion. Book value per common share increased 2.4% to $321.10; tangible book value per common share was $300.40.
- Average global core liquid assets were $423.2 billion. Average daily LCR was 127% and NSFR was 115%, above the 100% minimum requirements.
- Standardized CET1, Tier 1, and total capital ratios were 14.6%, 16.2%, and 18.3%, respectively. The standardized SLR was 5.4%, compared with a 5.0% requirement.
Material changes versus the prior comparable period
- Profitability improved materially, driven by stronger investment banking, market making, Asset & Wealth Management fees and investment gains, plus the absence of the Q1 2023 Marcus loan markdown.
- Credit costs changed from a $171 million net benefit to a $318 million provision. The Q1 2024 provision primarily reflected credit-card charge-offs and wholesale-loan impairments.
- Operating expenses rose only 3% despite higher revenue, aided by substantially lower commercial real estate impairments and lower depreciation and amortization. Compensation and benefits increased to $4.585 billion.
- The firm completed the sale of GreenSky and sold the remaining GreenSky loan portfolio of approximately $3.69 billion. The GM credit-card program is subject to a process to transition it to another issuer.
- Assets under supervision increased to $2.848 trillion from $2.672 trillion year over year, although Q1 2024 included $15 billion of net outflows, partially offset by $51 billion of market appreciation.
- The firm repurchased $1.5 billion of common stock and paid $929 million of common dividends, returning $2.43 billion to common shareholders. The remaining repurchase authorization was $22.704 billion at March 31, 2024.
Guidance, outlook, risks and unusual items
- Management expects the 2024 annual effective tax rate to be approximately 22%; Pillar II legislation had no material Q1 impact, but future guidance could affect later periods.
- Asset & Wealth Management targets more than $10 billion of annual management and other fees in 2024, including more than $2 billion from alternatives. It expects to raise $40 billion to $50 billion of alternative-investment commitments in 2024.
- The firm achieved its target of reducing historical principal investments below $15 billion during Q1 and expects reductions at approximately the same pace for the remainder of 2024, with most of the portfolio sold by the end of 2026.
- Management’s through-the-cycle targets are 14%–16% ROE and 15%–17% ROTE. Platform Solutions is targeted to reach pre-tax profitability by year-end 2025.
- Key external risks include inflation, interest-rate policy, geopolitical conflicts, commercial real estate weakness, market volatility, consumer credit deterioration, funding and liquidity stress, higher regulatory capital requirements, cybersecurity threats, model risk, litigation, and regulatory investigations.
- Credit-loss estimates used a forecast weighted toward baseline and adverse scenarios. A hypothetical 100% adverse-scenario weighting would have increased the allowance for credit losses by approximately $0.7 billion, excluding potential qualitative adjustments.
- Unusual Q1 items included a $78 million FDIC special assessment expense, $80 million of commercial real estate impairments, and a $747 million pre-tax debt valuation adjustment loss recognized largely in accumulated other comprehensive income.
- Aggregate reasonably possible legal losses were estimated at approximately $2.1 billion above reserves for matters where a range could be estimated. The firm also has a $1.4 billion asset-recovery guarantee to Malaysia related to 1MDB, with arbitration ongoing.
Most important facts for investors to verify
- Whether stronger investment banking and trading revenues persist, given management’s comments on economic uncertainty and a lower investment-banking backlog.
- Credit-card charge-offs, consumer delinquency trends, commercial real estate performance, and changes in the $4.902 billion loan-loss allowance.
- Progress toward Platform Solutions profitability and the impact of the GM credit-card transition.
- Deposit stability, secured-funding needs, cash levels, LCR, NSFR, and the effect of future market or credit-rating stress on liquidity.
- Final 2024 regulatory capital requirements, including potential changes to U.S. capital rules and the G-SIB surcharge.
- Execution and valuation of the Asset & Wealth Management historical principal investment sales plan.
- Developments in the 1MDB arbitration, consumer investigations, underwriting litigation, and other regulatory matters.