Goldman Sachs(GS) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2025, the company generated earnings per share (EPS) of $14.01, with a return on equity (ROE) of 16% and a return on tangible equity (ROTE) of 17.1% [3][26] - For the full year, EPS was $51.32, representing a 27% increase compared to the previous year, with an ROE of 15% and an ROTE of 16%, improving by 230 and 250 basis points respectively [3][26] - Total revenues for Q4 were $13.5 billion, with full-year revenues reaching $41.5 billion, an 18% increase year-over-year [26][27] Business Line Data and Key Metrics Changes - Global Banking & Markets (GBM) produced record revenues of $41.5 billion for the year, with investment banking fees of $2.6 billion in Q4, up 25% year-over-year [27][29] - FICC net revenues were $3.1 billion in Q4, up 12% year-over-year, while equities net revenues reached $4.3 billion, with equities financing results hitting a quarterly record of $2.1 billion, up 42% year-over-year [29][30] - Asset & Wealth Management (AWM) revenues were $16.7 billion for 2025, with a pre-tax margin of 25% and record management fees of $3.1 billion in Q4, up 10% year-over-year [30][31] Market Data and Key Metrics Changes - The investment banking backlog rose for the seventh consecutive quarter to a four-year high, primarily driven by advisory activities [29][72] - Total assets under supervision in AWM reached a record $3.6 trillion, driven by $66 billion of long-term fee-based net inflows [31][32] - Alternative assets under supervision totaled $420 billion at the end of Q4, contributing to $645 million in management fees [32] Company Strategy and Development Direction - The company aims to continue executing its strategy to grow and strengthen its position as a leading financial institution, focusing on client service, integrity, and excellence [4][5] - The firm is narrowing its strategic focus, including the transition of the Apple Card portfolio and enhancing its wealth management capabilities through partnerships with RIAs [7][18] - The introduction of One Goldman Sachs 3.0, an operating model propelled by AI, aims to improve efficiency and accountability across the organization [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the investment banking outlook for 2026, citing catalysts such as corporate strategic repositioning and increased sponsor activity [9][60] - The company believes it has raised the floor for returns significantly, with a focus on durable revenues that are less affected by market downturns [43][44] - Management remains cautious about potential economic shifts and geopolitical developments that could impact the operating environment [33][34] Other Important Information - The company announced a $0.50 increase in its quarterly dividend to $4.50, representing a 50% increase from the previous year, and has $32 billion of remaining buyback capacity [19][33] - The firm has diversified its funding structure, with deposits growing to $501 billion, representing approximately 40% of total funding [21][22] Q&A Session Summary Question: How does the company plan to scale wealth management? - Management highlighted the strength of its ultra-high net worth franchise and plans to expand through third-party wealth channels, including partnerships with RIAs [37][39] Question: What is the level of confidence in maintaining mid-teens returns? - Management expressed confidence in having raised the floor for returns significantly, with a focus on durable revenues and a diversified business model [42][44] Question: Is there potential for transformational M&A? - Management indicated that while the bar for significant acquisitions is high, they are open to opportunities that align with their strategic goals [52][54] Question: What is the current state of the capital market cycle? - Management believes the environment is set up for constructive M&A and capital markets activity in 2026, with potential for exceeding previous activity levels [58][60] Question: How does the company view its buyback strategy? - Management confirmed that buybacks remain an important part of their capital deployment strategy, balancing between supporting client activity and driving shareholder returns [65][66]