Goldman Sachs 10-Kyear ended 2025-12-31

Executive Summary

Goldman Sachs delivered higher FY2025 earnings as investment banking and client activity in Global Banking & Markets drove revenue growth, while it continued to withdraw from consumer credit cards. Net revenues rose 9% to $58.3B and net earnings rose 20% to $17.2B, but expenses grew faster than revenue and the planned Apple Card exit materially affected reported revenue and credit provisions. The firm enters 2026 with a smaller common share count and a clearer business focus, offset by negative operating cash flow, a lower capital ratio and a higher regulatory surcharge. For investors, the question is whether growth in banking and recurring asset-management fees can sustain returns without favorable portfolio-accounting effects.

Key Financial Highlights

• Revenue mix: Global Banking & Markets generated $41.5B, up 18%, including stronger investment banking; Asset & Wealth Management generated $16.7B, with fee growth largely offset by lower investment revenue.
• Earnings quality: The $1.11B credit-loss provision benefit, vs a $1.35B expense in 2024, included a $2.48B reserve release when Apple Card loans moved to held for sale. A related $2.26B reduction in Platform Solutions revenue reflected portfolio markdowns and transition obligations; the reserve release is not recurring operating improvement.
• Cash conversion: OCF diverged sharply from net earnings, including a $69.9B cash use from trading assets partly offset by a $57.6B source from trading liabilities. Capital expenditures were $2.06B.
• Capital return: Common-share repurchases totaled $12.4B; common shares outstanding fell from 311M to 296M, or 4.6%, net of issuance. Stock-based compensation rose to $3.62B.
• Funding and capital: Deposits rose 16% to $501B, while unsecured borrowings rose 14% to $356B. The Standardized common equity Tier 1 capital ratio declined to 14.3% from 15.0%, principally as credit risk-weighted assets increased.

Business Developments

Management is concentrating resources on institutional banking and markets, and on scaling Asset & Wealth Management’s third-party-funds business rather than direct balance-sheet investing. The December 2025 agreement to transfer Apple Card to another issuer, expected to take ≈24 months, follows the 2025 sale of the GM card program and would substantially advance the consumer-business withdrawal begun in 2023. At year-end, $21.3B of gross Apple Card loans had been classified as held for sale.

A Q4 segment realignment moved transaction banking into Global Banking & Markets and changed other activity allocations. It better reflects the intended business mix, but investors should account for presentation changes when comparing segments. Management is also pursuing technology and efficiency initiatives under OneGS 3.0 and agreed to acquire Innovator Capital Management; returns depend on execution and expense discipline, not simply a narrower portfolio.

Risk Assessment

• Market and client activity: Banking fees, trading results and asset-management revenue depend on transaction volumes, volatility, asset values and client flows; illiquid markets can simultaneously reduce activity and magnify position losses.
• Credit and counterparty exposure: Gross loans rose 19% to $240B; the loan-loss allowance fell to $2.15B largely following the Apple Card transfer, while nonaccrual loans were $3.39B and allowance coverage declined to 63.4%.
• Funding and liquidity: $159B of time deposits mature in 2026, and a two-notch downgrade could trigger $1.80B of additional derivative collateral or termination payments; market stress could also impede asset sales and funding access.
• Capital and regulation: The Standardized common equity Tier 1 ratio fell to 14.3%, and the global systemically important bank surcharge rose from 3.0% to 3.5% effective January 2026, potentially constraining distributions or balance-sheet growth.
• Valuation and model risk: Level 3 financial assets were $20.3B, and Level 3 derivatives produced $1.70B of realized and unrealized losses; difficult-to-observe inputs can amplify valuation uncertainty even where positions are economically hedged.
• Cybersecurity and operational resilience: Dependence on cloud providers, vendors and high-volume systems exposes Goldman to service disruption, data loss and regulatory consequences; a 2025 cloud-provider incident affected the firm.
• Legal and conduct exposure: Reasonably possible aggregate legal losses had an upper end $1.4B above reserves, while other matters could not be estimated; litigation and investigations may create additional costs.

Strategic Outlook and Investor Actionables

Goldman’s opportunity is to pair a stronger institutional franchise with more recurring asset-management fees as it exits consumer cards. The near-term test is whether those businesses can cover rising compensation and regulatory costs while the Apple transition proceeds.

• Banking and markets: Watch investment-banking fees and Global Banking & Markets pre-tax earnings for durable client-activity growth rather than gains driven mainly by favorable market conditions.
• Asset management and efficiency: Watch management and incentive fees alongside the efficiency ratio; fee growth that outpaces expense growth would support the strategic shift.
• Apple exit and capital: Watch transition milestones, subsequent credit provisions and the Standardized common equity Tier 1 ratio; further material portfolio adjustments or capital erosion would weaken the investment case.