36:49 Lena: Alright, let's talk about the financial performance of these different business lines. I want to understand not just what Goldman does, but how profitable each piece actually is for them.
2:05 Miles: Great question! The financial breakdown really tells the story of Goldman's business model. Looking at their 2024 numbers, Global Banking & Markets generated $34.94 billion in net revenues—that's about 65% of Goldman's total revenue. Asset & Wealth Management contributed $16.14 billion, which is roughly 30%. Platform Solutions was much smaller at $2.43 billion, or about 5%.
37:27 Lena: So Global Banking & Markets is really the dominant revenue driver. But what about profitability? Revenue doesn't tell the whole story.
37:35 Miles: You're absolutely right! The profit margins vary significantly between divisions. Global Banking & Markets tends to have higher margins because much of the revenue comes from fees and trading profits with relatively lower incremental costs. Asset & Wealth Management has been working to improve their margins—they actually achieved their medium-term target of mid-twenties pre-tax margin in 2024.
37:55 Lena: What does "mid-twenties pre-tax margin" mean in practical terms?
38:01 Miles: It means that for every dollar of revenue in Asset & Wealth Management, about 25 cents becomes pre-tax profit. That's actually quite good for asset management, where you have significant people costs and technology investments. Goldman has been focused on driving this business toward mid-teens returns on equity.
38:18 Lena: And what about Platform Solutions? You mentioned earlier that it has the lowest margins.
38:23 Miles: Platform Solutions has been challenging from a profitability standpoint. Consumer banking typically generates single-digit returns on equity, which is much lower than Goldman's traditional businesses. The materials show it had the lowest profit margin among Goldman's divisions and it's been getting worse over time.
38:38 Lena: So Goldman is essentially subsidizing their Platform Solutions business with profits from the other divisions?
38:46 Miles: That's one way to look at it, though Goldman views it as a long-term investment. They're willing to accept lower short-term returns if they believe Platform Solutions will become a significant profit center over the next decade.
38:57 Lena: Let's dive deeper into the Global Banking & Markets numbers. You mentioned $34.94 billion in revenue—how does that break down?
39:06 Miles: Within Global Banking & Markets, Investment Banking fees were about $6.8 billion for the first nine months of 2024. FICC generated $11.3 billion, and Equities brought in $12.2 billion. What's interesting is that Equities has been growing faster—up 23% year-over-year compared to FICC's 8% growth.
39:26 Lena: Why is Equities growing so much faster than FICC?
39:30 Miles: Several factors. Equity markets have been strong, which drives both trading volumes and client activity. Goldman has also built what they call "more durable revenue streams" in Equities financing—things like prime financing for hedge funds and securities lending. These financing revenues have grown at a 15% compounded annual rate since 2019.
39:50 Lena: So they've moved beyond just trading commissions to providing ongoing financing services?
3:34 Miles: Exactly! And that creates more predictable revenue streams. Instead of depending entirely on daily trading volumes, they have clients paying interest on borrowed securities and margin loans. It's similar to how banks make money from lending, but applied to securities markets.
40:10 Lena: What about the return on equity for these different businesses? That's probably a key metric for Goldman's shareholders.
1:21 Miles: Absolutely! Goldman's overall return on equity was 12.7% in 2024, up from previous years. But it varies by division. Global Banking & Markets has historically generated average ROE of 16% over the past five years, even across different market environments.
40:36 Lena: Sixteen percent ROE is pretty strong, right?
40:39 Miles: Very strong! For context, most banks are happy with ROE in the 10-15% range. Goldman's ability to consistently generate mid-teens returns is part of what makes their stock attractive to investors.
40:53 Lena: What drives those high returns in Global Banking & Markets?
39:30 Miles: Several factors. First, much of the revenue is fee-based rather than balance sheet intensive, so they don't need to tie up as much capital. Second, their market-making activities can generate significant profits when markets are volatile. Third, their financing businesses provide steady interest income with relatively low risk.
41:14 Lena: And for Asset & Wealth Management, what's driving the financial performance?
41:19 Miles: Asset & Wealth Management has been focused on growing their more durable revenue streams. Management and other fees plus Private banking and lending net revenues have grown at 12% compounded annually since 2019. They surpassed $10 billion in annual management and other fees in 2024.
41:35 Lena: Ten billion in management fees alone! That's substantial recurring revenue.
4:02 Miles: Right! And as their assets under supervision grow—they reached over $3 trillion in 2024—those management fees compound. Even a 1% annual management fee on $3 trillion generates $30 billion in revenue, though their actual blended fee rate is lower than that.
41:59 Lena: What about the growth trajectory? Which businesses are growing fastest?
42:03 Miles: Asset & Wealth Management has shown strong growth momentum. Net revenues increased 16.3% year-over-year in 2024, and they've had 28 consecutive quarters of long-term fee-based net inflows. That's remarkable consistency.
42:19 Lena: Twenty-eight consecutive quarters! That suggests clients are really satisfied with the service.
3:34 Miles: Exactly! And it shows the stickiness of their business model. Once clients entrust Goldman with managing their assets, they tend to stay and often add more assets over time. This creates a compounding effect on revenues.
42:38 Lena: What about costs? Managing all these businesses must be expensive.
42:43 Miles: Goldman's total operating expenses were $27.8 billion for the first nine months of 2024. The biggest component is compensation and benefits at $14.2 billion—that's about 51% of total expenses. This makes sense given that Goldman is essentially a people business.
42:59 Lena: Over fourteen billion just in compensation! That's enormous.
43:04 Miles: It is, but it's also necessary to attract and retain top talent. Goldman competes globally for the best investment bankers, traders, analysts, and portfolio managers. Their compensation model typically includes significant variable components tied to firm and individual performance.
43:20 Lena: So when Goldman does well, employees do well, which should align incentives?
43:25 Miles: That's the theory! Goldman has significant employee stock ownership, which aligns employee interests with shareholder returns. Many of their people have substantial portions of their wealth tied to Goldman's stock performance.
43:36 Lena: What about efficiency improvements? Are they finding ways to reduce costs?
1:21 Miles: Absolutely! Goldman launched a three-year program to optimize their organizational footprint and increase automation. They're using AI tools to improve productivity—things like developer coding assistants and natural-language AI assistants that help employees be more efficient.
43:58 Lena: So technology is helping them manage costs while improving service?
4:02 Miles: Right! Their efficiency ratio improved from 64.3% in the first nine months of 2023 to 62.1% in 2024. That means they're generating more revenue per dollar of expenses, which directly improves profitability.
44:18 Lena: Looking at all these numbers, what's your assessment of Goldman's overall financial health?
40:39 Miles: Very strong! They generated $53.5 billion in net revenues in 2024 with 16% year-over-year growth. Their return on equity of 12.7% is solid, and they've built a diversified revenue base that's less dependent on any single market condition or business line.
44:43 Lena: And they're returning money to shareholders too, right?
32:17 Miles: Definitely! They returned $3.25 billion to shareholders in Q3 2025 alone—$2 billion in share repurchases and $1.25 billion in dividends. They declared a $4.00 quarterly dividend per share, which shows confidence in their cash generation capabilities.
45:04 Lena: So the numbers support the strategic story we've been discussing—Goldman has built a diversified, profitable financial services platform that generates strong returns for shareholders while serving different client segments effectively.