Grade: B — Generally Healthy, Minor Concerns
Framework: Bank-specific analysis + Schilit principles (traditional manufacturing checks largely N/A for investment banks)
Data: SEC EDGAR 10-K (Filed 2026-02-25) + Yahoo Finance
Auditor: PricewaterhouseCoopers LLP — Unqualified opinion (1 Critical Audit Matter)
One-line verdict: Goldman Sachs delivered its second-best year ever — net earnings of $17.18B, ROE of 15.0%, ROTE of 16.0%, and diluted EPS of $51.32, up 27% from 2024. Book value per share reached $357.60. The efficiency ratio improved to 64.4%. Net revenues of $58.3B were up 9% driven by Global Banking & Markets and Asset & Wealth Management. Critically, provision for credit losses swung to a net benefit of $1.11B as GS released reserves from the exited Apple Card loan portfolio — a major one-time tailwind. The screening engine flags 5 fails and 1 watch, but virtually all are structural false positives for an investment bank: CFFO, FCF, cash-to-debt, and DSO metrics are artifacts of how trading assets, customer deposits, and market-making positions flow through bank financial statements. Goldman's real risks are compensation costs consuming 33% of revenue, trading revenue volatility, and the execution of its Platform Solutions wind-down.
| Metric | Result |
|---|---|
| Red Flags (Engine) | **5** (A1, C1, C2, C4, E1 — all structural bank/trading artifacts) |
| Watch Items | **1** (A2: AR growth vs revenue) |
| Checks Completed | **12/18** (6 N/A — standard checks inapplicable to investment banks) |
| Beneish M-Score | **N/A** (model does not apply to financial institutions) |
| F-Score (Fraud Probability) | **1.56** (0.58% probability) |
| Altman Z-Score | **N/A** (not applicable to banks) |
| Auditor | PricewaterhouseCoopers LLP — Unqualified opinion |
| Fiscal Year | 2025 (ended December 31, 2025) |
| Report Date | 2026-04-05 |
Important note on investment bank grading: The screening engine assigns Grade F based on CFFO/NI, FCF, cash-to-debt, and DSO flags. For an investment bank, operating cash flow is dominated by changes in trading inventory ($100B+ in securities positions), customer payables, and market-making activity. DSO is meaningless when "receivables" include secured borrowing positions. We override to B based on investment-bank-specific analysis: ROE, ROTE, efficiency ratio, capital ratios, and revenue diversity.
Record-Level Profitability
Per the 10-K:
| Metric | 2023 | 2024 | 2025 | Trend |
|---|---|---|---|---|
| Net Revenues | $46,254M | $53,512M | **$58,283M** | +9% |
| Net Earnings | $8,516M | $14,276M | **$17,176M** | +20% |
| Diluted EPS | $22.87 | $40.54 | **$51.32** | +27% |
| ROE | 7.5% | 12.7% | **15.0%** | Improving |
| ROTE | 8.1% | 13.5% | **16.0%** | Improving |
| Efficiency Ratio | -- | -- | **64.4%** | -- |
| Net Earnings to Average Assets | 0.5% | 0.9% | **1.0%** | Improving |
Per the filing: "Net earnings of $17.18 billion for 2025, compared with $14.28 billion for 2024." EPS growth of 27% outpaced net earnings growth of 20% due to share buybacks. Book value per common share reached $357.60, up 6.2%.
The Apple Card Exit: A $1.1B Reserve Release
The most significant item in the financials is the provision for credit losses, which swung from net provisions of $1.35B in 2024 to a net benefit of $1.11B in 2025.
Per the filing: the net benefit "reflected a net release related to the Apple Card loan portfolio (including a reserve reduction)" and the firm "transitioned the GM credit card program to another issuer."
This is the culmination of Goldman's exit from consumer lending — the Marcus / Apple Card experiment that generated billions in losses from 2020-2024. The $1.1B provision benefit is a one-time tailwind that directly boosted net income. Adjusting for this benefit, underlying earnings growth was closer to 14% rather than the reported 20%.
Segment Performance
Per the 10-K, Goldman operates three segments:
Global Banking & Markets: The dominant segment generating revenue from investment banking fees, FICC intermediation, equities intermediation, and financing. Per the filing, this segment drove higher net revenues reflecting "higher Markets noninterest revenue."
Asset & Wealth Management: Revenue from management fees, private banking and lending, and investment gains. Total AUS (assets under supervision) continues to grow, with the firm targeting higher fee-based recurring revenue.
Platform Solutions: The consumer-facing segment being wound down. The filing notes Goldman "transitioned the GM credit card program to another issuer" and released reserves from the Apple Card portfolio.
Capital and Liquidity
Per the 10-K:
| Capital Metric | 2023 | 2024 | 2025 |
|---|---|---|---|
| Total Shareholders' Equity | $116,699M | $119,204M | **$124,972M** |
| Book Value Per Share | -- | $336.77 | **$357.60** |
| Tangible BV Per Share | -- | -- | Reported separately |
| Goodwill + Intangibles | $6,147M | $5,895M | **$6,772M** |
| Goodwill/Equity | 5.3% | 4.9% | **5.4%** |
Goodwill at 5.4% of equity is negligible for a financial institution of this scale. Total shareholders' equity of $125B provides substantial capital buffers.
The filing discusses CET1 requirements including the G-SIB surcharge and Stress Capital Buffer (SCB) of 3.4%. Goldman's CET1 ratio and regulatory capital position are critical to its ability to return capital to shareholders.
Compensation and Efficiency
Per the filing: "Our efficiency ratio (total operating expenses divided by total net revenues) was 64.4% for 2025, compared with 65.7% for 2024." Improved operating performance drove lower compensation-to-revenue ratios, partially offset by higher transaction-based expenses.
Compensation and benefits remain the largest expense category — approximately 33% of net revenues — reflecting the human-capital-intensive nature of investment banking. This is an inherent operating leverage risk: in a revenue downturn, compensation adjustments lag revenue declines.
The 18-Point Screening
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | **FAIL*** | DSO surged 252 days. *Structural artifact — see note |
| A2 | AR vs Revenue Growth | WATCH | AR growth 39.0% vs revenue 8.9% |
| A3 | Revenue vs CFFO | PASS | Revenue +8.9% |
| B1 | Inventory vs COGS | PASS | No material inventory |
| B2 | CapEx vs Revenue | PASS | CapEx growth -1.3% vs revenue 8.9% |
| B3 | SG&A Ratio | N/A | Not applicable to banks |
| B4 | Gross Margin | N/A | Not applicable to banks |
| C1 | CFFO vs Net Income | **FAIL*** | CFFO < NI for 3 years. *Structural artifact |
| C2 | Free Cash Flow | **FAIL*** | FCF negative. *Structural artifact |
| C3 | Accruals Ratio | PASS | 3.4%. Low |
| C4 | Cash vs Debt | **FAIL*** | Cash 43% of debt. *Normal for banks |
| D1 | Goodwill + Intangibles | PASS | $6.8B = 5% of equity |
| D2 | Leverage | N/A | Not applicable to banks |
| D3 | Soft Asset Growth | N/A | Not applicable to banks |
| D4 | Asset Impairment | N/A | No write-off data |
| E1 | Serial Acquirer FCF | **FAIL*** | FCF negative. *Trading asset growth |
| E2 | Goodwill Surge | PASS | Goodwill change 1% YoY |
| F1 | Beneish M-Score | N/A | Not applicable to financial institutions |
*Note on all flags: For an investment bank, CFFO is dominated by changes in trading positions (financial instruments owned, secured borrowings, customer payables). Goldman's CFFO of -$45.2B in 2025 reflects growth in the trading book and client activity, not earnings deterioration. DSO is meaningless when "receivables" are secured financing positions. Cash-to-debt ratio at 43% reflects the normal funding structure of a global investment bank. These are all structural false positives.
Auditor Critical Audit Matter
PricewaterhouseCoopers flagged one Critical Audit Matter:
Allowance for Credit Losses: The estimation of expected credit losses across Goldman's lending portfolio requires "forecasted macroeconomic variables" and involves "especially challenging, subjective, or complex" judgment. Given the $1.1B provision benefit (reserve release) in 2025, the adequacy of remaining reserves is a key question for investors.
Key Financial Trends (4-Year)
| Metric | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|
| Net Revenues | $47.4B | $46.3B | $53.5B | $58.3B |
| Net Earnings | $11.3B | $8.5B | $14.3B | $17.2B |
| Diluted EPS | -- | $22.87 | $40.54 | $51.32 |
| Net Margin | 23.8% | 18.4% | 26.7% | 29.5% |
| ROE | 9.6% | 7.5% | 12.7% | 15.0% |
| Total Equity | -- | $116.7B | $119.2B | $125.0B |
| Goodwill/Equity | -- | 5.3% | 4.9% | 5.4% |
Summary
Grade: B. Generally healthy. Goldman Sachs's best earnings quality in years, with the Apple Card reserve release as the key one-time item.
Goldman's earnings quality is strong at the fundamental level: 15.0% ROE, 16.0% ROTE, improving efficiency ratio at 64.4%, negligible goodwill (5.4% of equity), and accruals ratio of 3.4%. The balance sheet has $125B in equity, providing substantial capital buffers.
The screening engine's 5 flags are all structural false positives for investment banks. The M-Score and Z-Score are not applicable to financial institutions — these models were designed for non-financial companies and produce unreliable results when applied to banks.
The concerns are specific:
Goldman is not a company with accounting red flags. It is a company whose earnings are heavily influenced by market conditions and one-time items. Strip out the Apple Card reserve release, and the underlying business still grew double-digits — a genuinely strong result.
**Disclaimer**: This report is based on Goldman Sachs' fiscal year 2025 10-K filed with the SEC on February 25, 2026. This is NOT investment advice.
**About EarningsGrade**: We screen earnings reports for financial red flags using an 18-point forensic framework. Grade B means the company is generally healthy with minor concerns to monitor.