Equity Research June 23, 2010 United States of America Financial Services Brokers, Asset Managers & Exchanges

Eric Bertrand 1.212.526.1369 eric.bertrand@barcap.com BCI, New York

Goldman Sachs Group Inc. (GS - US$ 134.79) 2-Equal Weight
Change of Price Target
Lowering 2Q on Tougher Market Conditions

Roger A. Freeman, CFA 1.212.526.4662 roger.freeman@barcap.com BCI, New York

Investment Conclusion
Financial market conditions have deteriorated notably since 1Q10, evidenced by sharply wider credit spreads, cash-derivative basis, declines in structured finance indices, sharply higher volatility and a "flight-to-safety" trade in less risky assets. We believe this market dislocation, while certainly smaller than the dislocations seen in 2008 and early 2009, has impacted broker-dealer revenue generation in terms of client activity levels, trading revenue and investment banking results. Additionally, we believe that 2Q results will be more divergent across the Street, driven more by relative positioning for the moves this quarter.

EPS (US$) (FY Dec)
2009 2010 2011 % Change
2010 65% -60% -34% -47% -31% 2011 N/A N/A N/A N/A 31% Actual Old New St. Est. Old New St. Est. N/A N/A 4.93E 1Q 3.39A 5.59A 5.59A 5.59A N/A N/A 5.04E 2Q 4.93A 5.35E 1.95E 4.29E N/A N/A 4.71E 3Q 5.25A 4.25E 3.46E 4.31E N/A N/A 5.79E 4Q 8.20A 5.25E 4.34E 5.21E Year 22.13A 20.44E 15.32E 19.21E 22.25E 20.00E 20.40E P/E 9.0 6.9

Market Data
Market Cap (Mil.) 71134 0.87 193.60 - 131.30 Dividend Yield 52 Week Range

Financial Summary
Revenue TTM (Mil.) 54151.0

We are lowering our 2Q10 EPS estimate from $5.35 to $1.95 vs. Street consensus of $4.29. The largest downward revisions are in lower core FICC (-40% seq to $4.49bn, -$1.18 EPS), lower core equities (-40% seq to $1.4bn, -$0.75 EPS), weaker investment banking (-37% seq to $743mm, -$0.39 EPS) and the inclusion of $650mm of UK bonus tax (-$0.90 EPS). Due to the lower ROE (13% in 2010) and BVPS growth, we are lowering our price target to $175 (1.3x P/B on year-end BVPS of $133) vs. prior $195 (1.4x P/B on prior year-end BVPS of $138).

Stock Overview
Gol d m an S achs Gr oup Inc. - 0 6 / 2 2 / 2 0 1 0

Reuters ADR





Stock Rating
New: 2-Equal Weight Old: 2-Equal Weight

Target Price
New: Old: US$ 175.00 US$ 195.00


135 Vol um e

Sector View: 2-Neutral


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Source: Barclays Capit al Live

Barclays Capital does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.


Equity Research Figure 1: Goldman Sachs – Summary Earnings Revisions ($mm)
GOLDMAN SACHS CVA UK Bonus Tax & Relate Investment Banking M&A ECM DCM Asset Management Securities Services Principal Investments ICBC PIA REPIA Core FICC Core Equities Total Revenue Previous 2Q10E Seq % $mm ----13% $1,332 20% $557 15% $427 0% $349 2% $969 30% $514 88% $961 34% $941 0% $0 0% $0 (15%) $6,210 10% $2,567 (2%) $12,553 New 2Q10E Seq % $mm -$250 -$650 (37%) $743 (25%) $348 (50%) $186 (40%) $209 1% $955 10% $435 (1%) $504 28% $775 (2%) ($254) (2%) ($26) (40%) $4,384 (40%) $1,400 (32%) $8,671 EPS Impact $0.15 ($0.90) ($0.39) ($0.14) ($0.16) ($0.09) ($0.01) ($0.06) ($0.30) ($0.11) ($0.17) ($0.02) ($1.18) ($0.75) ($3.40)

Source: Barclays Capital estimates

Figure 2: Goldman Sachs – Model Snapshot ($mm)
P&L: Total Revenue Trading and Principal Investment Banking Asset Mgmt & Sec Svc Other (mostly interest) Comp / Net Revenue Non-Comp Expense Pretax Margin Return on Equity EPS Y/Y Comparisons Sales Pretax Income EPS GS Metrics: Revenue by Product Equities Fixed Income Investment Banking Principal Investments Asset Mgmt & Sec Svc Pre-Tax Margins Investment Banking Trading and Principal Asset Mgmt & Sec Svc Total Pre-Tax Margin 1Q09 $9.4 $5.7 $0.8 $1.0 $1.9 50.0% 22.1% 27.9% 14.3% $3.39 13.1% 22.7% 4.8% 1Q09 $2.0 $6.6 $0.8 ($1.4) $1.0 14.3% 31.8% 17.0% 27.9% 2Q09 $13.8 $9.3 $1.4 $1.0 $2.0 48.3% 15.1% 36.5% 23.0% $4.93 46.0% 91.3% 45.5% 2Q09 $3.2 $6.8 $1.4 $0.8 $1.0 19.0% 41.7% 18.7% 36.5% 3Q09 $12.4 $8.8 $0.9 $1.0 $1.7 43.3% 18.0% 38.7% 21.4% $5.25 (10.1%) (4.7%) 6.4% 3Q09 $2.8 $6.0 $0.9 $1.3 $1.0 14.1% 44.6% 15.6% 38.7% 4Q09 $9.6 $5.1 $1.6 $1.2 $1.8 -5.4% 28.7% 76.7% 31.4% $8.20 (22.3%) 53.9% 56.2% 4Q09 $1.9 $4.0 $1.6 $0.5 $1.2 46.0% 94.7% 37.2% 76.7% 1Q10 $12.8 $9.2 $1.2 $1.0 $1.4 43.0% 16.6% 40.4% 20.3% $5.59 32.9% (30.1%) (31.8%) 1Q10 $2.4 $7.4 $1.2 $0.5 $1.0 19.8% 45.7% 19.5% 40.4% -$73 $840 2Q10E $8.7 $5.6 $0.7 $1.0 $1.3 43.0% 32.8% 24.2% 6.9% $1.95 (32.1%) (59.3%) (65.1%) 2Q10E $1.5 $4.6 $0.7 $0.5 $1.0 20.0% 26.0% 18.0% 24.2% -$75 $838 3Q10E $9.7 $6.2 $1.1 $1.0 $1.4 43.0% 22.6% 34.4% 12.0% $3.46 11.9% 59.1% 77.5% 3Q10E $1.8 $5.3 $1.1 $0.3 $1.0 20.0% 39.6% 18.0% 34.4% -$77 $862 4Q10E $9.1 $4.7 $1.2 $1.3 $1.8 29.7% 24.6% 45.8% 14.6% $4.34 (6.6%) 24.2% 25.3% 4Q10E $1.8 $4.2 $1.2 $0.3 $1.3 20.0% 58.0% 18.0% 45.8% -$80 $885 2008 $22.2 $8.1 $5.2 $4.7 $4.3 49.2% 40.3% 10.5% 4.7% $4.47 2009 $45.2 $28.9 $4.8 $4.1 $7.4 35.8% 20.3% 43.9% 21.8% $22.13 2010E $40.2 $25.8 $4.2 $4.3 $5.9 40.0% 23.3% 36.7% 13.4% $15.32 (11.0%) (25.7%) (30.8%) 2010E $7.3 $21.4 $4.2 $1.6 $4.3 19.9% 42.5% 18.3% 36.7% -$80 $866 2011E $46.4 $28.3 $5.0 $4.8 $8.4 40.0% 19.1% 40.9% 15.2% $20.00 15.4% 28.7% 30.6% 2011E $9.4 $24.3 $5.0 $1.3 $4.8 20.0% 48.1% 18.0% 40.9% -$92 $976

(51.7%) 103.3% (86.7%) 748.8% (81.9%) 394.7% 2008 $9.2 $3.7 $5.2 ($3.9) $4.7 39.4% -30.3% 38.1% 10.5% $233 $64 $779 2009 $9.9 $23.3 $4.8 $1.2 $4.1 26.5% 50.4% 22.4% 43.9% -$71 $852

Total Capital $252 $254 $255 $256 Total Equity $64 $63 $65 $71 AUM $771 $819 $848 $871 Y/Y Comparisons Revenue by Product Equities (20.4%) 27.8% 77.7% (26.9%) Fixed Income 108.7% 185.6% 275.6% (216.7%) Investment Banking (29.8%) (14.5%) (30.5%) 58.1% Principal Investments 164.7% 11.9% (378.4%) (114.1%) Asset Mgmt & Sec Svc (26.2%) (21.6%) (16.4%) 24.1% Source: Company reports, Barclays Capital estimates

17.6% 12.6% 43.9% (136.2%) (1.1%)

(54.4%) (32.5%) (48.4%) (37.8%) 4.3%

(36.9%) (12.2%) 18.4% (78.6%) 6.9%

(9.4%) 5.9% (23.8%) (45.9%) 10.7%

(18.6%) 7.4% (77.0%) 528.0% (31.4%) (7.5%) (202.6%) (130.4%) (1.2%) (12.5%)

(26.1%) (8.1%) (11.7%) 33.1% 5.4%

28.8% 13.5% 17.1% (18.3%) 10.2%


Equity Research

Analyst Certification: We, Roger A. Freeman, CFA and Eric Bertrand, hereby certify (1) that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this research report.

Other Team Members: Truong, Steven (BCI, New York) Hill, Kenneth (BCI, New York) 1.212.526.9937 1.212.526.7179 steven.truong@barcap.com kenneth.hill@barcap.com

Company Description: The Goldman Sachs Group is a global financial services firm specializing in investment banking, trading and principal investments, and asset management and securities services.


Equity Research
On September 20, 2008, Barclays Capital acquired Lehman Brothers' North American investment banking, capital markets, and private investment management businesses. All ratings and price targets prior to this date relate to coverage under Lehman Brothers Inc.

Important Disclosures: Goldman Sachs Group Inc. (GS)
Rating and Price Target Chart: GOLDMAN SACHS GROUP INC.
As of 14-Jun-2010 Currency = USD 256.00 240.00 224.00 208.00 192.00 176.00 160.00 144.00 128.00 112.00 96.00 80.00 64.00 48.00

US$ 134.79 (21-Jun-2010)

2-Equal Weight / 2-Neutral














Closing Price Recommendation Change
Currency=US$ Date Closing Price 16-Oct-09 184.37 05-Jun-09 149.01 15-Apr-09 121.19 09-Mar-09 73.95 10-Nov-08 71.21 26-Sep-08 137.99 19-Sep-08 129.80 03-Apr-08 176.53

Price Target Drop Coverage
Source: FactSet


Price Target 195.00 165.00 105.00 100.00 135.00 170.00 175.00 200.00

Date 19-Mar-08 14-Feb-08 06-Dec-07 21-Sep-07 30-Aug-07 15-Jun-07

Closing Price 166.49 176.56 222.51 209.98 171.38 226.19


Price Target 213.00 229.00 234.00 226.00 214.00 238.00


Barclays Bank PLC and/or an affiliate has received compensation for investment banking services from Goldman Sachs Group Inc. in the past 12 months. Barclays Bank PLC and/or an affiliate trades regularly in the shares of Goldman Sachs Group Inc.. Barclays Bank PLC and/or an affiliate has received non-investment banking related compensation from Goldman Sachs Group Inc. within the past 12 months. Goldman Sachs Group Inc. is or during the past 12 months has been an investment banking client of Barclays Bank PLC and/or an affiliate. Goldman Sachs Group Inc. is or during the last 12 months has been a non-investment banking client (securities related services) of Barclays Bank PLC and/or an affiliate. Valuation Methodology: Our $175 price target is based on a 1.3x P/B multiple on 2010E BVPS estimate of $133. Risks Which May Impede the Achievement of the Price Target: Principal gains are lumpy, greater risk tolerance increases potential for earnings volatility, priced to perfection, specialist business model is under fire, mortgage business is not vertically integrated


Equity Research Important Disclosures Continued: The analysts responsible for preparing this report have received compensation based upon various factors including the firm's total revenues, a portion of which is generated by investment banking activities.

Company Name Goldman Sachs Group Inc.

Ticker GS

Price US$ 134.79

Price Date 21-Jun-2010

Stock / Sector Rating 2-Equal Weight / 2-Neutral

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