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The Goldman Sachs Group, Inc.
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== Catalysts == 1. Consumer Banking Division Re-organization Goldman Sachs is actively considering divesting its partnerships, notably the Apple Card collaboration, as a strategic move to capitalize on consumers' unwavering appetite for credit. This shift in focus aligns with Goldman's decision to reevaluate its Main Street ambitions, and recent discussions with American Express about transferring the credit card partnership with Apple exemplify this trajectory. The company's intentions are not entirely unexpected, given its recent earnings call, during which it reported a $470 million loss from the partial sale of its Marcus loans portfolio. Additionally, Goldman's decision to put GreenSky up for sale adds to the indication of a shift in priorities. Furthermore, the latest results reveal potential challenges in the card business, with credit card loans amounting to $15 billion in the most recent quarter, down from $16 billion at the year's end, though still showing growth from $11 billion the previous year. A more comprehensive understanding of Goldman Sachs' and American Express' strategic plans will emerge in the forthcoming earnings results, shedding light on the potential growth prospects for both institutions in the consumer banking and card business domain. 2. Strong Adaptation to Fed’s Capital Holding Regulation Goldman Sachs stands less exposed to the impending regulations following the sector's earlier debacle this year. Recently, Michael Barr, the Federal Reserve's vice chair for supervision, proposed rules that would mandate banks with assets exceeding $100 billion to maintain higher capital reserves, aiming to bolster financial system stability. However, industry insiders express concern that these regulations might curb competitiveness and hinder banks' capacity to issue new loans. In response, Goldman Sachs has reassured its ability to adapt to the new rules while maintaining a focused approach on deploying capital effectively. The bank proactively announced a $30 billion buyback program in February 2023. Additionally, having successfully passed the Fed's annual stress test in June, Goldman is set to reduce its stress capital buffer, a measure of additional capital required, by 80 basis points to 5.5% in October. As a result, the bank raised its quarterly dividend by 10%, yielding 3%. 3. Goldman’s low sensitivity to interest rate swings Considering the net interest margin (NIM), a metric gauging the disparity between interest earned on assets and interest paid on deposits. As short-term rates ascend, all banks face mounting pressure to offer elevated yields to retain customer deposits. Wells Fargo (WFC) experienced a decline of 0.11 percentage point in its NIM, whereas U.S. Bancorp (USB) witnessed a decrease of 0.2 percentage point. On the other hand, Goldman Sachs, with a substantial portion of its revenue stemming from investment banking and trading activities, demonstrates lower sensitivity to fluctuations in interest rates. 4. Potential Rebound in Deal Making M&A amounted to a 46% decline in advisory revenue at Goldman—amid concerns about the economy and the Biden administration’s seeming eagerness to block every major deal. But with markets rallying and the Federal Trade Commission losing in court, a rebound in capital-markets activity alone could propel the stock, despite the other lingering issues.
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