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What to Expect from Bulge-Bracket Giant Goldman Sachs in 2018

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Promising future outlook

Goldman Sachs (GS) had total revenues of $8.3 billion in 3Q17 and a net profit of $2.1 billion. Its EPS (earnings per share) was $5.01. On a year-to-date basis, its revenues rose 8% compared to the same period the previous year, reflecting a broad contribution across the majority of its businesses.

Expected revenue for 4Q17 is $7.2 billion, which would make 2017 revenue ~$32 billion, a ~4.5% rise from 2016 at $30 billion.

GS operates in more than 30 countries, including Belgium, Israel, Germany, Spain, Turkey, the United Kingdom, and Japan. It has nearly 35,800 employees as of 3Q17, which is 5% more than 2Q17. Its global core liquid assets at the end of 3Q17 were $220 billion.

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Business segments

  • Investment Banking: This segment consists of financial advisory, which includes mergers and acquisitions, fundraising, corporate defense, and underwriting.
  • Institutional Client Services: This segment is involved in making the market and helps client transactions in various asset classes, including equity, currencies, fixed income, and commodity products.
  • Investing and Lending: Investing and lending activities, which are typically longer-term, include investing and relationship lending activities across various asset classes such as debt securities and loans, public and private equities, and real estate.
  • Investment Management: This segment helps provide investment and wealth advisory services.

Exploring new opportunities

Reflecting growth opportunities, GS has identified $5 billion of growth initiatives. It will incorporate opportunities in all its global departments, including investment banking, FICC (fixed income, currencies, and commodities), equities, investment management, and lending. GS believes that if this opportunity is successfully implemented, it will add an additional $2.5 billion in annual pre-tax earnings at a 30% marginal ROE (return on equity).

Below are Goldman Sachs’s major competitors and their EPS (earnings per share) for 3Q17:

  • Morgan Stanley (MS): $0.92
  • Bank of America (BAC): $0.40
  • JPMorgan Chase (JPM): $1.75
  • Wells Fargo (WFC): $0.84

Together, they form 28.7% of the Financial Select Sector SPDR ETF (XLF).

In the next part, we’ll take a look at each segment in detail. We’ll also look at GS’s future prospects, valuations, and dividends.

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