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Goldman's 4 divisions are expected to generate $36.8 billion in revenues for full-year 2020
Institutional Client Services = 37%Investing & Lending = 24%Investment Banking = 20%Investment Management = 19%
Total Revenue [=A+B+C+D]
Goldman Sachs's Business Model
What Does Goldman Sachs Offer?
Investment Banking: This division can be subdivided into two segments –M&A Advisory: It offers advisory services in Mergers & Acquisitions (M&A) and financial restructuring across sectors such as energy and power, industrials, healthcare, materials, technology etc.Equity Underwriting & Debt Origination: offers equity & debt underwriting services, which includes public offerings and private placements.
Institutional Client Services: This division can be subdivided into two segments –FICC (Fixed Income, Currency & Commodity) Trading: Goldman Sachs, through this division, makes markets in and trades interest rate and credit products, mortgage-related securities and loan products and other asset-backed instruments, currencies and commodities.Equity Trading: Goldman Sachs, through its equity trading division, makes markets in and trades equities and equity-related products, structures and enters into equity derivative transactions.
Investment Management: This represents Goldman's asset management arm, which provide private individuals with a full range of mutual fund and alternative investment products, and institutional clients with a fully integrated asset management offering.
Investing & Lending: It represents investing and relationship-lending activities across asset classes - including debt and equity securities, and real estate.
Who Are The Clients?
Goldman Sachs provides investment banking, securities trading, lending and investment management services toLarge Cap & Mid Cap CorporationsFinancial InstitutionsGovernmentsHedge Funds
What Are The Alternatives?
Goldman Sachs business model faces stiff challenges and competition from offerings by its global competitors such as:CitigroupJPMorganMorgan StanleyBank of AmericaBarclaysUSB
Total revenues have increased at an average annual rate of 6% over the last four years, from $30.6 billion in 2016 to $36.5 billion in 2019. However, it is expected to marginally grow in 2020 to $36.8 billion.
Thereafter, Goldman Sachs' revenues are expected to grow at an average annual rate of 3% and cross $38 billion by 2021.
Total Revenues [=A+B+C+D]
yoy change in Total Revenues
Goldman Sachs Stock (NYSE:GS)Goldman Sachs Valuation: Expensive or CheapMore Trefis Financial Industry Data
[A] Investment Banking revenues are expected to increase by 7.6% in 2020
Although the segment revenues grew 25% over 2016-2018 - from $6.3 billion in 2016 to $7.9 billion in 2018, it reported a decrease of 13.5% y-o-y in 2019 to $6.8 billion.
This was caused by 17% decline in equity underwriting & debt origination revenues due to negative market conditions and lower consumer activity in underwriting space, followed by 9% decline in M&A advisory revenues.
Moving forward, we expect the market conditions to improve in the subsequent years and enable investment banking revenues to cross $7.6 billion by 2021.
Investment Banking [=A+B]
M&A Advisory [A]
Equity Underwriting & Debt Origination [B]
yoy change in Investment Banking
[B] Institutional Client Services (ICS) revenues are expected to decline by 8.5% from $14.8 billion in 2019 to $13.5 billion by 2020
This segment has contributed more than 36% of total revenues over the last 4 years and is the highest contributing segment of Goldman.
Although FICC trading revenues have shown positive growth in 2019, thanks to the surge in last quarter, we expect the FICC trading revenue to normalize in 2020. This would result in a 15% y-o-y drop in the trading revenues for the year.
Thereafter, the segment revenues are expected to grow at an average annual rate of 3% and cross $14 billion by 2021.
Institutional Client Services [=A+B]
FICC Trading Revenues [A}
Equities Trading Revenue [B]
yoy change in Institutional Client Services
[C] Investment Management have grown 9% over the last four years -- from $5.8 billion in 2016 to $6.3 billion in 2019.
We expect the revenues to jump by 15% y-o-y in 2020 due to 5 bps decrease in fees as a % of Assets under Management.
Overall, the segment revenues are expected to increase from $6.3 billion in 2019 to $7.4 billion by 2021.
Investment Management [=A*B]
Goldman's Assets Under Supervision [A]
Fees as % of Assets Under Supervision [B]
yoy change in Investment Management
[D] Although Investing & Lending revenues have grown more than 2x -- from $4.1 billion in 2016 to $8.7 billion in 2019, we expect the growth to slow down in coming years.
We expect the segment revenues to be around $8.8 billion in 2021, which is slightly higher than the previous year.
Thereafter, it is expected to grow at an rate of 3% per annum an cross $9 billion by 2021.
Investing & Lending
yoy change in Investing & Lending
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