How Does Goldman’s Investment Banking Business Compare With Its Peers?

by Trefis Team
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Per Trefis estimates, Goldman Sachs’ (NYSE: GS) investment banking revenues (more specifically, advisory & underwriting fees) could increase from $7.9 billion in 2018 to $8.1 billion in 2021. This growth will likely be led by higher fees from its dominance in the M&A advisory industry. Notably, Goldman’s M&A advisory fees have been roughly 40% higher than its closest competitor (JPMorgan) over the last 4 years. Investment Banking is the second largest contributor to Goldman Sachs’ top line, with a revenue share of nearly 21% in 2018. Our interactive dashboard about Goldman Sachs’ growth in Investment Banking vis-à-vis its primary competitors provide an outlook for the business through 2021. The banks included in our peer comparison are Citigroup, Morgan Stanley, JPMorgan Chase and Bank of America. Besides summarizing the trends in M&A Advisory, Debt Origination and Equity Underwriting over the years, the dashboard also includes our forecast for each of these banks. Additionally, you can see more Trefis data for financial services companies here.

Forecasting and Comparing Mergers & Acquisitions Advisory Revenues

  • Goldman Sachs is the market leader in the global M&A advisory industry, with M&A advisory revenues of $3.5 billion in 2018. The figure is expected to increase to $3.7 billion by 2021.
  • Total M&A advisory revenues for Top 5 U.S. investment banks are expected to grow at an average annual rate of 2.5% over the next 3 years.

Forecasting and Comparing Debt Underwriting Revenues

  • JPMorgan is the market leader in the debt underwriting space and is expected to retain its position in coming years.
  • Goldman Sachs’ debt underwriting revenues were $2.7 billion in 2018, and we expect them to grow to over $2.9 billion by 2021.
  • It must be remembered here that debt origination volumes fell sharply in 2018 due to the combined effect of the U.S.-China trade war, Brexit and the Fed’s rate hike process. This hurt Debt Underwriting fees across investment banks for the year
  • Total Debt Underwriting revenues for the 5 largest U.S. investment banks are expected to grow at an average annual rate of 1.5% over the next 3 years.

Forecasting and Comparing Equity Underwriting Revenues

  • Morgan Stanley is the market leader in the Equity Underwriting space.
  • Goldman Sachs’ revenues are expected to decrease from $1.65 billion in 2018 to $1.5 billion in 2019, before improving to $1.61 billion by 2021.

Estimating Goldman Sachs’ Investment Banking Revenues

  • Goldman Sachs’ total investment banking revenues are expected to decrease in 2019 due to the ongoing weakness in the global investment banking environment.
  • However, it should recover over subsequent years and cross $8.1 billion by 2021 – representing an average annual growth rate of 1.2% for the period.

The dotted line in the figure above denotes Goldman Sachs Investment Banking revenues.

Goldman Sachs has the highest investment banking revenues among its peers and it is expected to retain the #1 position over the foreseeable future thanks to its unrivaled strength in the global M&A advisory industry.

Do not agree with our forecast? Create your own forecast for Goldman Sachs by changing the base inputs (blue dots) on our interactive dashboard.

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