đŒ Goldman Sachs (NYSE:GS) is a dominant player on Wall Street, excelling in both investment banking and asset management. It has built a strong reputation through significant investment fees and a broad market presence. However, revenue patterns have been volatile, with a notable 31.5% decline in 2022, emphasizing its sensitivity to economic downturnsâan essential factor for investors aiming for stable returns.
đ In the asset management segment, Goldman Sachs has maintained an average annual growth rate of 11.3%. Still, in 2023, asset management contributed only 15.2% to total revenue, underscoring a heavier dependence on more volatile investment banking streams. This imbalance could present risks, especially during periods of financial uncertainty when stability becomes crucial.
đ Compared to Morgan Stanley, Goldman Sachs has delivered higher average returns over time, but with less consistency. Key profitability measures such as Return on Assets (ROA) and Net Interest Margin (NIM) are lower, averaging 0.96% and 0.8%. These metrics indicate increased volatility, making GS more vulnerable during economic downturns, which could impact investor returns.
đŠ Capital adequacy is another area where Goldman Sachs trails Morgan Stanley. GS maintains a Tier 1 capital average of 16.0%, while Morgan Stanley holds a stronger 17.7%. This gap could signal potential risks for long-term investors who prioritize capital resilience as a measure of financial strength.
đ Despite offering attractive bond coupon rates averaging 6.98%, Goldman Sachs has a lower average credit rating of 6.7, suggesting higher credit risks compared to competitors. Conservative investors should carefully consider whether potential returns justify these risks, especially in the current economic climate. Is it time to reassess GS strategies?
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IMPORTANT: This article is of general nature only and readers should obtain advice specific to their circumstances from professional advisers.