Overview

According to HSBC analyst Saul Martinez, investors should not overlook Goldman Sachs as the bank’s deal-making activities regain momentum and its consumer banking business shows signs of improvement. Martinez initiated coverage of the bank with a buy rating and set a price target of $403, suggesting a potential upside of 25.5% from the previous day’s closing price.

Unique Positioning

Martinez stated that Goldman Sachs is well-positioned to benefit from both cyclical dynamics and its own strategic initiatives. The analyst believes the bank’s strong positioning will enable it to capitalize on upcoming market opportunities.

Challenging Year for Banks

The initiation of coverage by HSBC comes at a challenging time for the banking sector, especially after the closure of Silicon Valley Bank earlier this year, which resulted in a crisis of confidence. Despite this, Goldman Sachs has outperformed the broader market, with its shares experiencing a relatively modest 6.5% loss compared to the 15% decline of the SPDR S&P Bank ETF (KBE) in 2023.

Potential Growth Catalysts

Martinez believes that increased deal activity will drive investment banking revenue, leading to improved returns in Goldman Sachs’ global banking and markets division. The analyst also expects a decline in losses in the platform solutions segment as investments stabilize and credit losses normalize.

Rehabilitation of Asset and Wealth Management

Martinez highlights the positive impact of shifting Goldman Sachs’ asset and wealth management towards third-party money. This strategic move is expected to enhance the unit’s return on equities and pretax margins.

Anticipated Growth and Valuation Multiples

The analyst predicts strong growth in revenue and earnings for Goldman Sachs, even as other universal and super regional banks face challenges. Additionally, the bank could see increased valuation multiples driven by robust earnings and returns on equity and tangible common shareholders’ equity.

Potential Risks

Martinez cautions that the bank’s performance may deviate from expectations if investment banking does not improve or if sales and trading results weaken. Other potential risks include higher capital requirements, loss of management talent, or losses on sales of principal investments.

Disclaimer: This content includes contributions from ‘s Michael Bloom.