David Solomon of Goldman Sachs
Andrew Harrer | Bloomberg | Getty Images
Goldman Sachs CEO David Solomon took a moment to bask in his firm’s recent performance before raising the company’s medium-term financial targets.
Solomon on Thursday reminded the audience at a Credit Suisse conference that back in 2020, at Goldman’s first-ever Investor Day, he faced doubts after revealing a set of goals for a more profitable and efficient firm. But Goldman blew past those targets last year after a historic surge in trading and investment banking activity spurred on by the coronavirus pandemic.
“Two years ago now, there was a lot of skepticism around the targets we laid out and what we thought we could accomplish,” Solomon said. “When you look at our progress, obviously, we way exceeded the returns.”
Goldman’s new guidance for returns on tangible common shareholders’ equity is 15% to 17%, up from the 14% target that the bank had set in 2020. Still, the firm far exceeded those targets in 2021, when returns topped 24%.
The bank also increased its 2024 targets for gathering investments and fees in asset management and wealth management as well as transaction and consumer banking revenues.
Shares of the bank dipped 1.9%, tracking the 2.1% decline of the KBW Bank Index.
Solomon, who took over from predecessor Lloyd Blankfein in late 2018, has presided over a revival in the company’s focus and share performance. Goldman has gained market share in traditional strengths including trading and investment banking, while building out new digital ventures in corporate cash management and consumer finance.
When Credit Suisse analyst Susan Roth Katzke admitted that she was “probably a skeptic” that Goldman could reach a 60% efficiency ratio when it disclosed the target in 2020, Solomon corrected her.
“You were probably not a skeptic, you were a skeptic, “Solomon interjected, before expressing confidence they could maintain the 60% target. The efficiency ratio is an industry metric that looks at expenses as a percentage of revenue; lower ratios show greater efficiency.
“We feel great about the strategy,” Solomon said. “We’re very confident about our ability to move forward and continue to deliver very strong returns to shareholders.”