Earnings season outpost: Citi is optimistic about Goldman Sachs (GS.US) asset management growth, but is worried that the overall valuation is “too high and cold”

The Zhitong Finance App learned that the Goldman Sachs Group (GS.US) was analyzed in depth in the research report published by Citigroup. According to the report, although Goldman Sachs's stock price performance has been strong since the release of the third quarter earnings report, with a cumulative increase of 22%, its current valuation level already reflects the market's high expectations for its performance growth. Citi gave Goldman Sachs a “neutral” rating. The target price was 765 US dollars, and there is room for decline of about 19.5% compared to the closing price of 914.34 US dollars on January 2.

The report provides a detailed analysis of Goldman Sachs's performance expectations for the fourth quarter of 2025. Although Goldman Sachs may face some pressure in business areas such as investment banking due to factors such as the government shutdown, Citi expects to achieve 20% earnings per share (EPS) growth in 2026, which is 5% higher than market consensus. Despite this, Citi believes Goldman Sachs's current price-earnings ratio of 2.7 times the book value (TBV) reflects the market's expectations for a return on equity (ROTCE) of 20% or more after future normalization, while management previously gave a guidance range of 15% to 17% on Analyst Day 2023. Despite this, Citi believes that Goldman Sachs's valuation may be temporarily shelved by investors in the current market environment because the market is more concerned about its potential performance in the context of deregulation and capital market recovery.

Looking at specific business segments, Citi expects Goldman Sachs's global banking and markets (GBM) business revenue to increase by about 10% year-on-year in the fourth quarter of 2025, but the year-on-year growth rates of investment banking (IB) and transaction fees may reach 17% and 9%, respectively. However, compared to market consensus, Citi's forecast shows some downside risk, particularly in the fixed income, currency, and commodities (FICC) business. Despite this, Citi is optimistic about Goldman Sachs's 2026 outlook, and it is expected that growth in banking and market fees will drive up performance.

The report also points out that Goldman Sachs has performed well in the asset and wealth management (AWM) business, and management fee revenue has increased significantly. Citi expects that as Goldman Sachs continues to expand in this field, its management fee revenue will continue to grow steadily over the next few years, which will provide important revenue support for the company. Additionally, Goldman Sachs's performance in equity and debt underwriting is also worth watching. Although Citi expects revenue from its equity underwriting business to drop by about 12% year on year in the fourth quarter of 2025, debt underwriting business revenue is expected to increase by about 20% year on year, showing Goldman Sachs's strong competitiveness in the fixed income field.

In terms of risk, Citi indicated that the main negative risks Goldman Sachs may face include a significant slowdown in investment banking and capital market activity, as well as possible significant investment losses. If the global economy falls into a deep recession or market activity is drastically reduced, Goldman Sachs's revenue stream may be seriously affected. Additionally, if the stock, fixed income, real estate, or commodity markets experience a severe decline, or if hedging strategies fail, Goldman Sachs may suffer losses that exceed expectations.

However, Citi also pointed out some positive risk factors, such as the possibility that the economy and capital market will recover faster than expected, and Goldman Sachs may announce a capital return plan that exceeds expectations. These factors may have a positive impact on Goldman Sachs's stock price.

Citi's research report also provides a detailed analysis of Goldman Sachs's stock price performance. Since 2023, Goldman Sachs's stock price trend has shown significant volatility, but has generally shown an upward trend. Citi believes that although Goldman Sachs's stock price may be affected by market sentiment and macroeconomic factors in the short term, in the long run, its competitive advantage in investment banking, trading, and asset management will provide it with a continuous growth engine. In addition, Goldman Sachs's investment in digital transformation and technological innovation may also bring it new business growth points.

Overall, Citi's in-depth analysis of Goldman Sachs shows that although Goldman Sachs may face some valuation pressure in the current market environment, its strong performance in various business areas and future growth potential have made it a worthy investment target. When evaluating Goldman Sachs shares, investors need to comprehensively consider its business growth prospects, macroeconomic environment, and potential risk factors.