Finance

Goldman Sachs shares slip despite higher financial targets given at first-ever investor day

Key Points
  • The company said Wednesday in a release that return on tangible common shareholders' equity will exceed 14% within three years.
  • Last year, the firm posted ROTE of 10.6%, brought down in part by $1.24 billion in legal costs.
  • Goldman said that in the longer term, returns would be in the "mid-teens or higher" as its nascent businesses, including in retail banking, mature. 
David Solomon, CEO, Goldman Sachs, speaking at the World Economic Forum in Davos, Switzerland, Jan. 23, 2020.
Adam Galacia | CNBC

Goldman Sachs released new financial targets for higher returns at its first-ever investor day.

The company said Wednesday in a release that return on tangible common shareholders' equity will exceed 14% within three years. Last year, the firm posted ROTE of 10.6%, brought down in part by $1.24 billion in legal costs.

Goldman said that in the longer term, returns would be in the "mid-teens or higher" as its nascent businesses, including in retail banking, mature. Those return targets are similar to those given this month by its rival Morgan Stanley. 

"We're looking to broaden the business that we have [and] strengthen the existing businesses," Solomon told Wilfred Frost in a CNBC interview. "Then we have a handful of investments we're making where we think we can diversify our revenue, create some more durable revenue that mixes with our capital-markets heavy revenue, and the result of that is drive returns higher over a period of time."

Goldman also said it planned to shave expenses by $1.3 billion over three years by leaning on automation and moving employees to cheaper locales. The new metrics were well-received by investors in attendance, though some were concerned that it would be hard for Goldman to boost revenue while also cutting costs.

"We expect to be held to these targets," CFO Stephen Scherr said. "In fact our ambition is to exceed them."

Shares of the bank slipped 1% at 4 p.m. after climbing about 1.5% in premarket trading.