Professional Documents
Culture Documents
Letter To Shareholders 2018
Letter To Shareholders 2018
While much has changed over the course of our 150-year history, teamwork, integrity, adaptability and
client service remain at the core of our culture.
The strength of our culture and client franchise was at the heart of our financial performance in 2018.
We achieved record diluted earnings per common share, and attained our highest annual return on
average common shareholders’ equity and return on average tangible common shareholders’ equity since
2009. Net revenues of $36.62 billion and pre-tax earnings of $12.48 billion were both 12 percent higher
compared with 2017 and the highest since 2010. Book value per common share and tangible book value
per common share increased by 15 percent during the year to $207.36 and $196.64, respectively.
Stephen M. Scherr
Chief Financial Officer
David M. Solomon
Chairman and
Chief Executive Officer
John E. Waldron
President and
Chief Operating Officer
These various initiatives to strengthen and grow our management offering. Over time, we expect this will
existing businesses will be underscored by an emphasis grow to be another core capability of our client-centric
on delivering the full value of One Goldman Sachs to multiproduct Marcus platform.
our clients. An increasing number of institutions and
We are pleased with our early progress: we have
companies interact with different parts of our firm.
more than 3 million total customers, $36 billion in
They don’t view their relationship with Goldman Sachs
consumer deposits in the U.S. and the U.K., and nearly
through the prism of a product or division. Historically,
$5 billion of consumer loans. We are cognizant of the
we have tended to manage our client relationships
risk profile of our nascent consumer lending business
through more of a divisional lens, which can sometimes
and will remain attentive to where we are in the cycle
limit a more holistic view of how best to identify and
as we grow our business for the long term.
meet the needs of these clients who are global,
complex and multifaceted. We are also developing a dynamic, digital cash
management and payments platform for corporate clients.
One of my first priorities as CEO has been to ensure
And, the potential for Goldman Sachs in this space is
that the full range of our services and skill set is more
significant. The industry cash management wallet is larger
accessible, comprehensive and efficiently delivered.
than the global investment banking wallet we compete
In that vein, we have formed a cross-divisional client
for today.
initiative, led by senior leaders in our Institutional
Client Services, Investment Management and Investment As the leading M&A advisor globally, companies already
Banking businesses to work with a pilot group of trust us to provide advice on their most significant
clients with multidimensional business needs. transactions. We will build on these strong relationships
and forge new ones by delivering new solutions that solve
Even at this early stage, I am encouraged by the feedback
customer frustrations around outdated technology and
from our clients and what we have learned from them.
limited customization and analytics.
Over time, we plan to expand this initiative to a broader
group of clients with the simple goal of ensuring that We see a real opportunity to provide clients with a modern,
we are orienting our client coverage around what is global cash management platform that is both secure
most important to our clients regardless of division and flexible. We expect this business to be accretive to
or product area focus. our return profile and to provide a number of benefits
to adjacent businesses, including growing deposits and
generating more client flows for our currencies franchise.
Diversify Our Business Mix
with New Products and Services We are making tangible progress in building this platform
A second element of our strategy is a focus on more and I expect that we will launch a cash management
durable revenues through lending and deposit activities, offering to clients next year.
cash management and wealth management. We have
made considerable progress over the past five years, Achieve Greater Operating Efficiency
but there is more we can do in the years ahead. Our third strategic priority is to ensure we are maximizing
In 2016, we established Marcus: by Goldman Sachs, operating efficiency by investing in automation and
our digital consumer financial services business. We technology that will improve the client experience and
are working to connect our growing customer base — drive expense savings across our businesses.
and their growing wealth — to our broader suite of For instance, in FICC, we are a top-2 institutional
services as we develop a multitiered digital wealth provider and gained share in six of eight asset classes
OBJECTIVES
KEY TENETS
S U P E R I O R L O N G - T E R M T O TA L S H A R E H O L D E R R E T U R N S
in 2018,2 but the opportunity set and the global FICC it right. But an unwavering cultural commitment to it
wallet has declined significantly over the past decade. To lies at the heart of an effective financial institution and
adapt, we have made important improvements in FICC’s we believe it is a core competence that helps define
efficiency, reducing standardized risk-weighted assets by Goldman Sachs.
40 percent and expenses by more than 20 percent, each
compared to 2013. FICC will continue to be a valuable Our People
offering for our clients and we see attractive opportunities
I have been fortunate to have worked closely with
to build scale within FICC as the market structure continues
Lloyd Blankfein over the years, who stepped down as
to evolve. Part of building scale is through improving the
Chairman and CEO last year. Throughout his 36 years
client experience and that means operating more efficiently.
of dedicated service to the firm, his keen understanding
Positioning ourselves for growth across our businesses of markets and risk have been invaluable to keeping the
partially entails funding investments from realized operating firm both nimble and resolute in the face of constant
leverage in our core businesses. To help enforce this, we change. And amidst the most turbulent days of the global
are looking at our costs holistically and have improved financial crisis, it was Lloyd’s fortitude and leadership
our firmwide efficiency ratio to 64 percent in 2018, down that steadily navigated Goldman Sachs and its people
nearly 2 percentage points over the past two years. through one of the most difficult episodes in our history.
We also are identifying ways to manage our balance He has been a valued partner and colleague, and I am
sheet more efficiently. We have identified deposits as a grateful for his mentorship, judgment and counsel.
strategic focus to diversify our funding mix and lower In my travels and time with clients, one refrain I hear
our funding costs and have grown our deposit base by time and again is that Goldman Sachs is different because
$34 billion over the past two years to $158 billion at of the quality of our people. Our success in delivering
the end of 2018. for our clients and on our strategic priorities depends
on attracting, retaining and developing talented people.
A Culture of Risk Management Professionals want to be constantly learning, working
As we grow and expand our business reach, bringing on important problems that have broad significance to
Goldman Sachs to more clients and customers, we industries, economies and society, and to be surrounded
are dedicated to maintaining the primacy of the by diverse colleagues.
control function at the firm and upholding the highest In my short time as CEO, I’ve been vocal about the
standards in risk and operational management. importance of advancing our firm’s diversity, including
There are always important lessons to be learned from with respect to gender, race, sexual orientation, disability
difficult situations and as it relates to 1MDB, we have or whatever contributes to who we are. Effectively
looked back and will continue to reflect on anything serving a broad and diverse set of clients means having
else the firm could have done better. It remains a priority an appreciation and understanding of their different
for me that our culture of integrity, compliance and experiences, interests and values, and we are committed
to building a team capable of that critical work. Over
escalation only improves from this experience.
the years, the firm’s diversity and inclusion efforts have
Effective risk management is demanding and difficult. evolved from raising broader awareness and delivering
It requires constant vigilance and we won’t always get an array of programs to a more deliberate, data-driven
and targeted strategy.
We have made progress in recent years and have more Since the launch of our 10,000 Women initiative in
diverse representation on our Board of Directors. In 2008, we have invested over $150 million to help
addition, our most recent partner class had the highest women entrepreneurs across 56 countries, providing
percentage of women and black partners in our history practical business education, mentoring, networking
and, we are nearly there on the campus analyst hiring and access to capital. Most recently, we have
goals we established last year. But, we have a longer path democratized access to business education on a global
ahead of us as it relates to our broader diversity ambitions. scale through the introduction of online business
We are working with our Global Diversity Committee to education courses. In addition, this past year, the Women
advance specific goals and objectives. We are undertaking Entrepreneurs Opportunity Facility — developed in
new initiatives aimed at increasing the representation of partnership with the IFC as the first of its kind gender
diverse communities at all levels across the firm. This facility — surpassed $1 billion in investments to financial
includes increasing the representation of our analyst and institutions in 31 countries and is well on its way to
entry-level associate new joiners — which represents more providing capital to 100,000 women.
than 70 percent of our annual hiring — to 50 percent
Through our 10,000 Small Businesses program,
women, 11 percent black professionals and 14 percent
launched in 2010, we have committed $500 million to
Hispanic/Latino professionals in the Americas, and
provide training and access to capital to small business
9 percent black professionals in the U.K.
owners looking to grow and create new jobs in their
Fundamental change takes time, but if we’re rigorous in communities, with compelling results. To date,
our execution of incremental change, we will make it we have graduated 8,200 small business owners, with
happen. We simply do not have a choice but to strive to 78 percent of graduates reporting revenue increases and
be one of the most diverse and inclusive institutions in 57 percent adding jobs within 30 months of graduation.
the world. If we are not creative and do not take the
We will continue our commitment to these extraordinary
right measures to embed a more diverse workforce across
programs, but we see an increasing opportunity to focus
every facet of diversity, we put in jeopardy our relevance
on some of the other important issues that are facing
to our clients and the markets we serve.
society today — from the environment to health care
to urban development.
Sustainability
For example, our Urban Investment Group (UIG)
Managing the firm responsibly is core to our goal has been a major investor in community development
of driving superior long-term shareholder returns. projects, committing more than $7 billion in underserved
We cannot be successful over the long term for our American markets since 2001. In 2018, UIG continued
investors unless we think broadly about the impact its long-term support of the Brooklyn Navy Yard
we have on society and our communities — and then, by committing $35 million to renovate Building 127,
orient ourselves toward ways we can allocate a 95,000-square-foot manufacturing center that will
capital purposefully. drive the creation of approximately 300 quality urban
A dedication to service and a commitment to using our manufacturing jobs.
expertise and convening power to help address broader Last year, we announced Launch With GS, a
issues has long been a core element of our culture. Over $500 million initiative to invest in women-led companies
the course of many years, we have developed innovative and investment managers. Through this effort, we are
and meaningful philanthropic programs that have harnessing our deep investment expertise to narrow
improved business education and provided access to the gender investing gap in three ways: committing firm
capital for thousands of women entrepreneurs and capital in women-founded, owned or led businesses,
small businesses. directing client capital to invest in women-centered
And as another example, at the end of 2018, we reached As we look to the future, we are building new
$80 billion in our goal to finance or invest $150 billion businesses and reorienting the firm for a broader set
in clean energy by 2025. of opportunities. We have a robust approach to risk
management and a strong balance sheet with the talent
to deploy and protect it. We are investing across our
Clean Energy Investments
and Financings businesses to serve new and existing clients and build
upon an extraordinary client franchise. That’s why I am
very confident of Goldman Sachs’ ability to generate
Since 2012:
$80B
strong, industry-leading returns through the cycle.
Target by 2025:
Looking Ahead
Goldman Sachs of 2018 looks very different from the
firm Marcus Goldman started a century and a half ago.
Frankly, it looks different from when I started here nearly
20 years ago. One of the reasons that Goldman Sachs has
succeeded for so long is that it reflects individuals who
have been able to adapt with the changing times — from
market professionals who see how the emergence of new