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Goldman Sachs Group Inc GS

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Morningstar’s Analysis

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1-Star Price

PREMIUM

5-Star Price

PREMIUM

Economic Moat

PREMIUM

Stewardship

PREMIUM

Goldman Sachs’ Financials Restated for 1MDB Charge Within Expected Range; Shares Fairly Valued

Michael Wong, CFA, CPA Sector Director

Analyst Note

| Michael Wong, CFA, CPA |

Narrow-moat Goldman Sachs released restated second-quarter financial statements for the 1MDB agreement with the Malaysian government, and we don’t anticipate making a material change to our $218 fair value estimate. The company increased its provisions for litigation and regulatory provisions by $2.01 billion, which reduced its net income to common shareholders to $197 million, or $0.53 per diluted share, from its previously reported $2.2 billion, or $6.26 per diluted share. We estimate that the company may have cumulatively provisioned around $4.5 billion related to 1MDB, though the agreement with the Malaysian government was for a $2.5 billion payment and came with a guarantee that at least $1.4 billion of proceeds from seized assets would be remitted to Malaysia. This means that Goldman Sachs may have already accrued several hundred million to over $1 billion for other settlements or regulatory fines related to 1MDB. Goldman Sachs also reduced its “reasonably possible aggregate loss” estimate for legal proceedings to $0.9 billion from $3.2 billion at the end of the first quarter of 2020, which reduces the potential size of legal charges in coming quarters. With the company’s market capitalization of $70 billion and $90 billion of shareholders’ equity, it should be able to absorb additional legal charges.

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Company Profile

Business Description

Goldman Sachs is a global investment banking firm whose activities are organized into investment banking (20% of net revenue), global markets (40% of net revenue), asset management (25% of net revenue), and consumer and wealth management (15% of net revenue) 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.

Contact
200 West Street
New York, NY, 10282
T +1 212 902-1000
Sector Financial Services
Industry Capital Markets
Most Recent Earnings Mar 31, 2020
Fiscal Year End Dec 31, 2020
Stock Type High Yield
Employees 38,300

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