On Monday, Citi maintained a Neutral rating on shares of Goldman Sachs (NYSE:GS) with a price target of $410. The financial institution reported robust top-line results, primarily propelled by its Global Banking and Markets (GBM) division, which delivered an 18% return on equity (ROE) for the quarter.
This performance exceeded the typical over-the-cycle range of 14-16% ROE for the segment. Despite this, Citi advised against projecting these results forward.
Goldman Sachs' Asset Wealth Management (AWM) sector, however, did not meet expectations, with softer equity investments net revenue attributed to net write-downs on public equities. The growth in the alternatives sector has been decelerating, with alternatives fees showing a year-over-year decrease of 2% and a quarter-over-quarter drop of 15%.
Citi analysts believe that AWM is crucial for Goldman Sachs to achieve mid-teens returns across the firm.
The compensation ratio for Goldman Sachs came in 100 basis points lower than Citi's projections and consensus estimates, while non-compensation expenses aligned with Citi's expectations and surpassed consensus. In terms of capital strength, the Common Equity Tier 1 (CET1) ratio saw a 30 basis points increase during the quarter, reaching 14.7%.
The tangible book value (TBV) of Goldman Sachs also saw an approximate 2.5% increase from the previous quarter. Citi's commentary reflects a careful assessment of Goldman Sachs' financial performance, highlighting specific areas of strength and weakness within the company's diverse operations.
InvestingPro Insights
Goldman Sachs (NYSE:GS) has been displaying a robust financial performance according to recent data. With a market capitalization of $139.03 billion and a solid price-to-earnings (P/E) ratio of 15.49 as of the last twelve months of Q4 2023, the company's valuation metrics are indicative of its strong market position. An impressive gross profit margin of 83.16% further underlines Goldman Sachs' efficiency in generating earnings relative to its revenue.
Investors should note that Goldman Sachs has a history of rewarding shareholders, having raised its dividend for 12 consecutive years and maintaining dividend payments for 26 years straight. This commitment to shareholders is reflected in a dividend yield of 2.68% and a 10% dividend growth in the last twelve months as of Q4 2023. Additionally, Goldman Sachs' management has been actively engaged in share buybacks, a strategy that can reflect confidence in the company's future prospects.
InvestingPro Tips underscore that while 10 analysts have revised their earnings downwards for the upcoming period, the company remains a prominent player in the Capital Markets industry and is expected to be profitable this year. With liquid assets that exceed short-term obligations, the company's financial health appears robust.
For readers interested in a more comprehensive analysis, there are 4 additional InvestingPro Tips available that delve deeper into Goldman Sachs' financial outlook. Access these insights and leverage the exclusive coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. This offer can provide investors with valuable tools to make informed decisions about their investments in the capital markets sector.
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