Goldman raises profitability target as it seeks to bridge gap with rivals

Goldman raises profitability target as it seeks to bridge gap with rivals

Goldman Sachs on Thursday lifted a key profitability target as the Wall Street giant redoubles efforts to close the valuation gap that has opened up with rival banks.

In a slide presentation, Goldman said it was aiming for a return on average tangible common equity (ROTE), a key measure of profitability, of 15 to 17 per cent over the next three years.

This is up from a previous target of more than 14 per cent outlined at an investor day in 2020 when David Solomon, Goldman’s chief executive, laid out a diversification strategy for the bank.

“We’re executing on the strategy, and we’re very confident about our ability to move forward and continue to deliver very strong returns for shareholders,” Solomon said at a financial services conference organised by Credit Suisse.

The new ROTE target is roughly in line with what some analysts were anticipating. Analysts at Jefferies earlier this week said in a note they expected Goldman to give a target of more than 15 per cent.

By comparison, Morgan Stanley last month told investors it was targeting an ROTE of at least 20 per cent over the “longer term”, without giving a more precise timeframe. JPMorgan Chase has set itself a “medium-term” ROTE