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Unless you’ve been living under a rock for your whole life, you’ve probably heard of Goldman Sachs. It was Vault’s most prestigious investment bank for eleven consecutive years, from 2008 to 2019. Established in 1869, Goldman Sachs now employs 40,000 people around the world.
But what does Goldman Sachs do, and how do they make their money? Even if you know a little about investment banking, the sums of money talked about in relation to Goldman Sachs are mind-boggling. Read on to find out more.
What Does Goldman Sachs Do?
Goldman Sachs is a leading global investment bank. They provide financial services to a diverse client base. This includes governments, financial institutions, and individuals with a high net worth.
Put in simple terms, Goldman Sachs exists to operate as an intermediary between people or companies that need to raise money, and entities that have money available to invest.
Goldman Sachs’ Business Segments
Goldman Sachs operates across four different main segments. It also formally reports its activities across these areas.
This segment involves providing advisory services to help companies to grow and strengthen their businesses by raising capital This can include advice regarding mergers and acquisitions, risk management, debt underwriting, and restructuring.
Goldman Sachs provides advisory services to help clients to protect and increase their financial assets. This includes alternative investments such as hedge funds, commodities, and currencies. Goldman Sachs’ revenue is generated through fees and commissions for such services.
Investing and Lending
This area is where Goldman Sachs makes the most money. As a bank, one of their primary purposes is to lend money to corporate clients.
They also offer secured loans to individuals of high net worth. Given that these clients are extremely wealthy with excellent credit ratings, chances of loan defaults are low, making this an extremely profitable area of business.
Institutional Client Services
This segment is focused on facilitating transactions for clients in currency, equity, and commodity products. Goldman Sachs operates across a broad range of products and this diversity is critical to their success.
Relationship-building is a fundamental aspect of Goldman Sachs business principles and it’s in this segment where this plays out in full. It’s critical that the client’s risk appetite is understood and respected in investment decisions.
How Does Goldman Sachs Make Money?
Goldman Sachs generates revenue from fees for financial advisory and underwriting services, as well as investment management fees. Like any company, their income comes from goods and services sold to clients.
Goldman Sachs’ annual revenue for the twelve months up to June 30th, 2020 was just over $40 billion. This is a 14.64% increase in its revenue from the previous year. Mind-boggling indeed!
Why Goldman Sachs Is So Famous
What does Goldman Sachs do? The answer, as we’ve seen, is to make enormous amounts of money! This bank is famous as one of the most well-established investment banks in America. Everyone has heard of them, and now you understand a little more about what they do.
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