Goldman Sachs Sets Three-Year Targets to Boost Efficiency and Profitability

Goldman Sachs is setting efficiency and profitability targets. It says it wants to be 'more transparent and easier to understand' as it builds out traditional businesses and new ones.
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A year after a management transition, Goldman Sachs  (GS) - Get Report is setting three-year goals to operate more profitably and more efficiently.

The iconic investment bank, founded in 1869, said in a statement tied to its first Investor Day that it wants to be "more transparent and easier to understand" as it builds out traditional businesses and newer ones.

The firm is positioned "to deliver higher, more durable returns for our shareholders over the long term," Chairman and CEO David Solomon said in the statement.

Its three-year targets include 13% return on equity; 14% return on tangible equity (ROE excluding intangibles like goodwill), and a 60% efficiency ratio, which measures how well a company is using its assets and liabilities in current operations.

Bloomberg reported that Goldman's ROE in 2019 was 11.5%, excluding charges related to litigation. Its efficiency ratio was 68%, which was prompted higher by legal expense. A lower efficiency ratio shows that a bank is operating more efficiently.

Longer term, Goldman Sachs said it aims for "returns in the mid-teens or higher as certain of its newer businesses, such as transaction banking and consumer banking, mature" and as it expands its third-party alternatives-investing business and wealth-management division.

Goldman is in talks to settle a legal dispute tied to a Malaysia investment fund. The firm could face fines that run into the billions, Bloomberg reported.

In 2019's third quarter, Goldman Sachs earned $4.79 a share, down 24% from $6.28 a share in the year-earlier quarter. Revenue fell 6% to $8.32 billion. 

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