Goldman Sachs(GS) - 2022 Q4 - Annual Report

PART I Business The company reorganized into three new segments in Q4 2022 and targets $750 billion in sustainable finance by 2030 - Effective Q4 2022, Goldman Sachs restructured its operations from four segments into three new ones: Global Banking & Markets, Asset & Wealth Management, and Platform Solutions[16] - The firm has set a target to deploy $750 billion in sustainable financing, investing, and advisory activity by 2030, with approximately 55% of this goal achieved as of December 2022[23] Overview of New Business Segments | Segment | Key Activities | Revenue Sources | | :--- | :--- | :--- | | Global Banking & Markets | Investment banking (advisory, underwriting), FICC & Equities intermediation and financing, relationship lending | Investment banking fees, FICC & Equities revenues, Other | | Asset & Wealth Management | Investment services for institutional and individual clients, wealth advisory, private banking, consumer banking (Marcus), equity and debt investments | Management and other fees, incentive fees, private banking and lending revenues, equity and debt investment gains/losses | | Platform Solutions | Consumer platforms (credit cards, point-of-sale financing), transaction banking for corporate and institutional clients | Net interest income from consumer lending, fees and net interest income from transaction banking | Aspirational Diversity Hiring Goals for Analysts & Associates | Demographic | Americas Goal | Americas 2022 Actual | UK Goal | UK 2022 Actual | | :--- | :--- | :--- | :--- | :--- | | Women Professionals | 50% | 44% | N/A | N/A | | Black Professionals | 11% | 10% | 9% | 17% | | Hispanic/Latinx Professionals | 14% | 13% | N/A | N/A | Risk Factors The firm faces substantial market, liquidity, credit, operational, and regulatory risks inherent to its global business - Market risks include adverse effects from global financial conditions, declining asset values impacting net 'long' positions and management fees, and changes in market volatility[64] - Liquidity risks stem from the potential inability to access debt markets or sell assets, disruptions in credit markets, and credit rating downgrades which could trigger additional collateral requirements[64] - Credit risks involve potential losses from the deterioration in credit quality or default of third parties, concentration of risk, and exposures from derivative transactions[64] - Operational risks include failures in systems, human error or misconduct, infrastructure disruptions, and cyber attacks, which could lead to data disclosure and financial losses[64] - The firm is subject to extensive global regulation, and its proposed 'single point of entry' resolution strategy could result in greater losses for Group Inc's security holders[64][96] Unresolved Staff Comments The company reports no material unresolved written comments from the SEC staff received before the fiscal year-end - There are no material unresolved written comments from the SEC staff[106] Properties The company's global real estate portfolio includes its 2.1 million square foot headquarters in New York Office Space by Region | Region | Square Feet (approx.) | | :--- | :--- | | Americas | 6.7 million | | Europe, Middle East and Africa | 1.8 million | | Asia, Australia and New Zealand | 2.8 million | Legal Proceedings The company is involved in numerous legal and regulatory proceedings with currently indeterminate material impact - The firm is involved in a number of legal and regulatory proceedings and has estimated a range of reasonably possible aggregate loss for certain matters[106] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company details its stock trading, Q4 2022 share repurchases, and a new $30 billion buyback program - In February 2023, the Board approved a new share repurchase program authorizing up to $30 billion of common stock, replacing the prior program[108] Q4 2022 Share Repurchases | Period | Total Shares Purchased | Average Price Paid Per Share | | :--- | :--- | :--- | | October 2022 | 1,368,286 | $328.88 | | November 2022 | 2,816,047 | $372.86 | | December 2022 | — | — | | Total Q4 | 4,184,333 | N/A | Management's Discussion and Analysis of Financial Condition and Results of Operations Net revenues fell 20% to $47.37 billion in 2022, driven by declines in Asset & Wealth Management and Investment Banking Executive Overview Net earnings fell 48% to $11.26 billion in 2022, with diluted EPS at $30.06 and $6.70 billion returned to shareholders Financial Highlights (2022 vs. 2021) | Metric | 2022 | 2021 | Change | | :--- | :--- | :--- | :--- | | Net Revenues | $47.37 billion | $59.34 billion | -20% | | Net Earnings | $11.26 billion | $21.64 billion | -48% | | Diluted EPS | $30.06 | $59.45 | -49% | | ROE | 10.2% | 23.0% | -12.8 p.p. | | Provision for Credit Losses | $2.72 billion | $357 million | +662% | Results of Operations A 20% revenue decline was driven by a 48% drop in Investment Banking, partially offset by a 21% rise in Market Making Net Revenues by Line Item (in millions) | Revenue Line | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Investment banking | $7,360 | $14,136 | -48% | | Market making | $18,634 | $15,357 | +21% | | Other principal transactions | $654 | $11,615 | -94% | | Total non-interest revenues | $39,687 | $52,869 | -25% | | Net interest income | $7,678 | $6,470 | +19% | | Total net revenues | $47,365 | $59,339 | -20% | Operating Expenses (in millions) | Expense Line | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Compensation and benefits | $15,148 | $17,719 | -14.5% | | Transaction based | $5,312 | $4,710 | +12.8% | | Other expenses | $10,704 | $9,509 | +12.6% | | Total operating expenses | $31,164 | $31,938 | -2.4% | Segment Operating Results Global Banking & Markets revenue fell 12% and Asset & Wealth Management plummeted 39%, while Platform Solutions grew 135% Segment Pre-Tax Earnings (in millions) | Segment | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Global Banking & Markets | $14,168 | $17,363 | -18% | | Asset & Wealth Management | $1,307 | $10,728 | -88% | | Platform Solutions | $(1,989) | $(1,047) | -90% | Balance Sheet and Funding Sources Total assets were $1.44 trillion, with a diversified funding profile led by $387 billion in deposits Balance Sheet Overview (in trillions) | Item | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total Assets | $1.44 | $1.46 | | Total Liabilities | $1.32 | $1.35 | | Total Shareholders' Equity | $0.117 | $0.110 | Funding Sources Breakdown (as of Dec 31, 2022) | Source | Amount (billions) | Percentage | | :--- | :--- | :--- | | Deposits | $386.7 | 40% | | Unsecured long-term borrowings | $247.1 | 26% | | Collateralized financings | $155.0 | 16% | | Total shareholders' equity | $117.2 | 12% | | Unsecured short-term borrowings | $61.0 | 6% | Capital Management and Regulatory Capital The firm maintained a strong CET1 ratio of 15.1% and a Stress Capital Buffer of 6.3% as of year-end 2022 - Based on the 2022 CCAR results, the FRB reduced the firm's Stress Capital Buffer (SCB) from 6.4% to 6.3%, effective October 1, 2022[234] Key Capital Ratios (as of Dec 31, 2022) | Ratio | Firm Actual | Requirement | | :--- | :--- | :--- | | Standardized CET1 Ratio | 15.1% | 13.3% (as of Oct 1, 2022) | | Advanced CET1 Ratio | 14.4% | N/A | | TLAC to RWAs | 43.7% | 21.5% | Risk Management The firm manages risk via a three-lines-of-defense model, with a GCLA portfolio averaging $398 billion in 2022 - The firm's risk management is structured around three lines of defense: 1) Revenue-producing units, 2) Independent risk oversight, and 3) Internal Audit[262] Average Daily Value-at-Risk (VaR) (in millions) | Risk Category | 2022 | 2021 | | :--- | :--- | :--- | | Interest rates | $97 | $60 | | Equity prices | $33 | $43 | | Currency rates | $32 | $13 | | Commodity prices | $47 | $25 | | Total (after diversification) | $114 | $86 | Global Core Liquid Assets (GCLA) - 2022 Average | Asset Class | Amount (billions) | | :--- | :--- | | Overnight cash deposits | $228.2 | | U.S. government obligations | $126.3 | | U.S. agency obligations | $11.0 | | Non-U.S. government obligations | $32.5 | | Total | $398.1 | Financial Statements and Supplementary Data This section presents the audited consolidated financial statements, management's report on controls, and the auditor's opinion Consolidated Financial Statements The statements show 2022 net revenues of $47.4 billion, net earnings of $11.3 billion, and total assets of $1.44 trillion Consolidated Statement of Earnings Highlights (in millions) | Line Item | 2022 | 2021 | | :--- | :--- | :--- | | Total net revenues | $47,365 | $59,339 | | Provision for credit losses | $2,715 | $357 | | Total operating expenses | $31,164 | $31,938 | | Pre-tax earnings | $13,486 | $27,044 | | Net earnings | $11,261 | $21,635 | Consolidated Balance Sheet Highlights (in millions) | Line Item | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total assets | $1,441,799 | $1,463,988 | | Total liabilities | $1,324,610 | $1,354,062 | | Total shareholders' equity | $117,189 | $109,926 | Notes to Consolidated Financial Statements The notes detail the new segment structure, fair value measurements, and credit loss allowances - Note 1 confirms the firm's reorganization into three new business segments (Global Banking & Markets, Asset & Wealth Management, Platform Solutions) starting in Q4 2022[411] - Note 4 and 5 detail the firm's fair value measurements; as of Dec 31, 2022, Level 3 financial assets were $26.0 billion, representing 1.8% of total assets[120][393] - Note 9 discloses that the allowance for loan losses for the wholesale portfolio was $2.6 billion as of Dec 31, 2022, based on macroeconomic forecasts[395] PART III & IV Other Information, Corporate Governance, and Exhibits This section covers procedural matters and incorporates governance and compensation details by reference from the Proxy Statement - Information required by Part III, Items 10 through 14 is incorporated by reference from the company's Proxy Statement for its 2023 Annual Meeting of Shareholders[4][9][10][11]