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Goldman Sachs Earnings: Strong Start to Year as Investment Banking and Trading Power Results

We expect investment banking to continue to recover in 2024.

The logo for Goldman Sachs appears above a trading post on the floor of the New York Stock Exchange.
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The Goldman Sachs Group Inc

Key Morningstar Metrics for Goldman Sachs

What We Thought of Goldman Sachs’ Earnings

Investment banking revenue is recovering from recently depressed levels, but strong trading results overshadowed this. Goldman Sachs GS reported net income to common shareholders of $3.9 billion, or $11.58 per diluted share, on $14.2 billion of net revenue. Investment banking revenue increased 32% from a year ago and 26% from the previous quarter to $2.1 billion. However, commissions and market-making revenue of $7.1 billion was about 8% higher than last year and 60% higher sequentially. The annualized return on equity for the quarter was 14.8%, and the return on tangible common equity was 15.9%. We don’t anticipate making a material change to our $417 fair value estimate and assess that shares are fairly valued.

The timing and magnitude of interest rate cuts have recently become more uncertain in the United States. However, the economy remains strong, and most still expect rates to trend lower over the next few years. Given this generally positive backdrop, we expect investment banking to continue to recover in 2024, with the growth in the first quarter being concrete evidence of the increasing willingness of corporations and investors to engage in the capital markets.

Trading revenue (about 50% of total revenue in the quarter) remains a wild card. This quarter was abnormally strong at over $7 billion, but it’s more a question of whether “normal” is closer to the $3.5 billion pre-covid level or the $5 billion-$6 billion post-covid level. We’re currently modeling somewhere in between at around $4.5 billion.

The Goldman Sachs Group Stock vs. Morningstar Fair Value Estimate

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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About the Author

Michael Wong

Sector Director
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Michael Wong, CFA, CPA, is director of equity research, financial services, North America, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Michael previously served as chair of the valuation committee. Before assuming his current role in 2017, he was a senior equity analyst, covering investment banks and brokerages. Before joining Morningstar in 2008, he worked in corporate and public accounting.

Wong holds a bachelor’s degree in business administration, with concentrations in accounting, corporate finance, and financial services from San Francisco State University, where he graduated summa cum laude. He also holds the Chartered Financial Analyst® designation and is a Certified Public Accountant. Wong has also passed the Certified Financial Manager (CFM) and Certified Management Accountant (CMA) exams.

Wong won the “Technology Thought Leadership” award at the 2016 Industry Awards for his report, The Financial Services Observer: The U.S. Department of Labor’s Fiduciary Rule for Advisors Could Reshape the Financial Sector. In 2011, he ranked second in the Investment Services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. Wong was awarded the summer 2005 Johnson & Johnson Institute of Management Accountants CFM Gold Medal.

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