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Goldman Refocuses on Investment Banking: Will It Pivot to Profit?
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Key Takeaways
GS retains the top spot in announced and completed M&A deals in 1Q25 despite sector headwinds.
Goldman has exited consumer finance to refocus on high-margin IB and trading businesses.
GS's IB revenues fell 8% y/y, but a strong advisory backlog signals potential recovery ahead.
The Goldman Sachs Group (GS - Free Report) reaffirmed its dominance by maintaining its long-standing top position in announced and completed mergers and acquisitions (M&A) in the first quarter of 2025. This underscores the firm’s enduring strength in investment banking (IB) despite broader headwinds in the sector.
To strengthen its core operations, GS has made thoughtful moves to exit non-core consumer banking and sharpen its focus on areas wherein it holds a competitive edge — IB and trading.
Last November, Goldman received a proposal from Apple to end their consumer banking partnership, per the Wall Street Journal report. The collaboration may end before the contract runs out in 2030, according to a January 2025 Reuters report. In 2024, Goldman finalized a deal to transfer its GM credit card business to Barclays and completed the sale of GreenSky, its home-improvement lending platform. In 2023, the company divested its Personal Financial Management unit.
These moves have enabled Goldman to reallocate capital and focus on higher-margin, more scalable businesses.
While a resurgence in M&A was anticipated for 2025, market volatility, driven by the Trump administration's tariff proposals and persistent inflation, has delayed recovery expectations to the second half of 2025. Despite stabilizing interest rates and strong corporate cash positions, many companies are taking a cautious approach to deal activity amid economic uncertainty.
Though Goldman's IB revenues fell 8% year over year in the first quarter of 2025, its leadership in deal-making and a growing backlog of advisory suggest a strong rebound is likely when market conditions stabilize. This will give Goldman a strategic edge over its peers.
Key Competitors Challenging GS in IB
JPMorgan (JPM - Free Report) remains a dominant force in the IB business, ranking #1 for global IB fees. Despite tariff-related ambiguity and extreme market volatility, in the first quarter of 2025, JPMorgan’s IB fees grew 12% year over year to $2.18 billion, driven by the rise in advisory fees and debt underwriting income. However, the delay in the expected IB rebound will affect JPMorgan’s IB fees, but a healthy IB pipeline, an active M&A market and the leadership position will help it capitalize once the macro situation changes.
Morgan Stanley (MS - Free Report) has leaned heavily into the IB business, though it has been diversifying into more stable revenue-generating sources like asset and wealth management businesses, creating a more balanced revenue stream across market cycles. The uptrend in Morgan Stanley’s IB revenues continued this year, with the first-quarter 2025 number growing 8% from the prior-year quarter. Morgan Stanley remains cautiously optimistic about the performance of the IB business this year, supported by a stable and diversified M&A pipeline.
GS shares have gained 5.7% year to date compared with the industry’s growth of 8.9%.
Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, Goldman trades at a forward price-to-earnings (P/E) ratio of 12.78X, below the industry’s average of 13.61X.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GS’s 2025 and 2026 earnings implies year-over-year growth of 9.6% and 13.1%, respectively. The estimates for 2025 and 2026 have been unchanged over the past 30 days.
Image: Bigstock
Goldman Refocuses on Investment Banking: Will It Pivot to Profit?
Key Takeaways
The Goldman Sachs Group (GS - Free Report) reaffirmed its dominance by maintaining its long-standing top position in announced and completed mergers and acquisitions (M&A) in the first quarter of 2025. This underscores the firm’s enduring strength in investment banking (IB) despite broader headwinds in the sector.
To strengthen its core operations, GS has made thoughtful moves to exit non-core consumer banking and sharpen its focus on areas wherein it holds a competitive edge — IB and trading.
Last November, Goldman received a proposal from Apple to end their consumer banking partnership, per the Wall Street Journal report. The collaboration may end before the contract runs out in 2030, according to a January 2025 Reuters report. In 2024, Goldman finalized a deal to transfer its GM credit card business to Barclays and completed the sale of GreenSky, its home-improvement lending platform. In 2023, the company divested its Personal Financial Management unit.
These moves have enabled Goldman to reallocate capital and focus on higher-margin, more scalable businesses.
While a resurgence in M&A was anticipated for 2025, market volatility, driven by the Trump administration's tariff proposals and persistent inflation, has delayed recovery expectations to the second half of 2025. Despite stabilizing interest rates and strong corporate cash positions, many companies are taking a cautious approach to deal activity amid economic uncertainty.
Though Goldman's IB revenues fell 8% year over year in the first quarter of 2025, its leadership in deal-making and a growing backlog of advisory suggest a strong rebound is likely when market conditions stabilize. This will give Goldman a strategic edge over its peers.
Key Competitors Challenging GS in IB
JPMorgan (JPM - Free Report) remains a dominant force in the IB business, ranking #1 for global IB fees. Despite tariff-related ambiguity and extreme market volatility, in the first quarter of 2025, JPMorgan’s IB fees grew 12% year over year to $2.18 billion, driven by the rise in advisory fees and debt underwriting income. However, the delay in the expected IB rebound will affect JPMorgan’s IB fees, but a healthy IB pipeline, an active M&A market and the leadership position will help it capitalize once the macro situation changes.
Morgan Stanley (MS - Free Report) has leaned heavily into the IB business, though it has been diversifying into more stable revenue-generating sources like asset and wealth management businesses, creating a more balanced revenue stream across market cycles. The uptrend in Morgan Stanley’s IB revenues continued this year, with the first-quarter 2025 number growing 8% from the prior-year quarter. Morgan Stanley remains cautiously optimistic about the performance of the IB business this year, supported by a stable and diversified M&A pipeline.
Goldman’s Price Performance, Valuation & Estimates
GS shares have gained 5.7% year to date compared with the industry’s growth of 8.9%.
Price Performance
From a valuation standpoint, Goldman trades at a forward price-to-earnings (P/E) ratio of 12.78X, below the industry’s average of 13.61X.
Price-to-Earnings F12M
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for GS’s 2025 and 2026 earnings implies year-over-year growth of 9.6% and 13.1%, respectively. The estimates for 2025 and 2026 have been unchanged over the past 30 days.
Estimates Revision Trend
Image Source: Zacks Investment Research
Goldman currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.