Equity Research

June 23, 2010 United States of America

Financial Services
Goldman Sachs Group Inc. (GS - US$ 134.79) 2-Equal Weight Brokers, Asset Managers & Exchanges
Change of Price Target Roger A. Freeman, CFA Eric Bertrand
1.212.526.4662 1.212.526.1369
Lowering 2Q on Tougher Market Conditions roger.freeman@barcap.com eric.bertrand@barcap.com
BCI, New York BCI, New York
Investment Conclusion
‰ Financial market conditions have deteriorated
EPS (US$) (FY Dec)
notably since 1Q10, evidenced by sharply wider
credit spreads, cash-derivative basis, declines in 2009 2010 2011 % Change
structured finance indices, sharply higher volatility Actual Old New St. Est. Old New St. Est. 2010 2011
and a "flight-to-safety" trade in less risky assets. 1Q 3.39A 5.59A 5.59A 5.59A N/A N/A 4.93E 65% N/A
We believe this market dislocation, while certainly 2Q 4.93A 5.35E 1.95E 4.29E N/A N/A 5.04E -60% N/A
smaller than the dislocations seen in 2008 and 3Q 5.25A 4.25E 3.46E 4.31E N/A N/A 4.71E -34% N/A
early 2009, has impacted broker-dealer revenue 4Q 8.20A 5.25E 4.34E 5.21E N/A N/A 5.79E -47% N/A
generation in terms of client activity levels, trading Year 22.13A 20.44E 15.32E 19.21E 22.25E 20.00E 20.40E -31% 31%
revenue and investment banking results. P/E 9.0 6.9
Additionally, we believe that 2Q results will be
more divergent across the Street, driven more by Market Data Financial Summary
relative positioning for the moves this quarter.
Market Cap (Mil.) 71134 Revenue TTM (Mil.) 54151.0
Summary Dividend Yield 0.87
‰ We are lowering our 2Q10 EPS estimate from 52 Week Range 193.60 - 131.30
$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 Stock Overview
$650mm of UK bonus tax (-$0.90 EPS). Reuters
Gol d m an Sachs Gr oup Inc. - 0 6 / 2 2 / 2 0 1 0 GS
195
‰ Due to the lower ROE (13% in 2010) and BVPS Bloomberg GS
growth, we are lowering our price target to $175 180 ADR
(1.3x P/B on year-end BVPS of $133) vs. prior
$195 (1.4x P/B on prior year-end BVPS of $138). 165

Stock Rating Target Price

150

New: 2-Equal Weight New: US$ 175.00 135

Vol um e
Old: 2-Equal Weight Old: US$ 195.00
50M

Sector View: 2-Neutral

Ju l Au g Sep Oct Nov Dec Jan Feb Mar Ap r May Ju n
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.

PLEASE SEE ANALYST(S) CERTIFICATION(S) ON PAGE 3 AND IMPORTANT DISCLOSURES BEGINNING

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

Figure 2: Goldman Sachs – Model Snapshot ($mm)

P&L: 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10E 3Q10E 4Q10E 2008 2009 2010E 2011E
Total Revenue $9.4 $13.8 $12.4 $9.6 $12.8 $8.7 $9.7 $9.1 $22.2 $45.2 $40.2 $46.4
Trading and Principal $5.7 $9.3 $8.8 $5.1 $9.2 $5.6 $6.2 $4.7 $8.1 $28.9 $25.8 $28.3
Investment Banking $0.8 $1.4 $0.9 $1.6 $1.2 $0.7 $1.1 $1.2 $5.2 $4.8 $4.2 $5.0
Asset Mgmt & Sec Svc $1.0 $1.0 $1.0 $1.2 $1.0 $1.0 $1.0 $1.3 $4.7 $4.1 $4.3 $4.8
Other (mostly interest) $1.9 $2.0 $1.7 $1.8 $1.4 $1.3 $1.4 $1.8 $4.3 $7.4 $5.9 $8.4
Comp / Net Revenue 50.0% 48.3% 43.3% -5.4% 43.0% 43.0% 43.0% 29.7% 49.2% 35.8% 40.0% 40.0%
Non-Comp Expense 22.1% 15.1% 18.0% 28.7% 16.6% 32.8% 22.6% 24.6% 40.3% 20.3% 23.3% 19.1%
Pretax Margin 27.9% 36.5% 38.7% 76.7% 40.4% 24.2% 34.4% 45.8% 10.5% 43.9% 36.7% 40.9%
Return on Equity 14.3% 23.0% 21.4% 31.4% 20.3% 6.9% 12.0% 14.6% 4.7% 21.8% 13.4% 15.2%
EPS $3.39 $4.93 $5.25 $8.20 $5.59 $1.95 $3.46 $4.34 $4.47 $22.13 $15.32 $20.00
Y/Y Comparisons
Sales 13.1% 46.0% (10.1%) (22.3%) 32.9% (32.1%) 11.9% (6.6%) (51.7%) 103.3% (11.0%) 15.4%
Pretax Income 22.7% 91.3% (4.7%) 53.9% (30.1%) (59.3%) 59.1% 24.2% (86.7%) 748.8% (25.7%) 28.7%
EPS 4.8% 45.5% 6.4% 56.2% (31.8%) (65.1%) 77.5% 25.3% (81.9%) 394.7% (30.8%) 30.6%
GS Metrics: 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10E 3Q10E 4Q10E 2008 2009 2010E 2011E
Revenue by Product
Equities $2.0 $3.2 $2.8 $1.9 $2.4 $1.5 $1.8 $1.8 $9.2 $9.9 $7.3 $9.4
Fixed Income $6.6 $6.8 $6.0 $4.0 $7.4 $4.6 $5.3 $4.2 $3.7 $23.3 $21.4 $24.3
Investment Banking $0.8 $1.4 $0.9 $1.6 $1.2 $0.7 $1.1 $1.2 $5.2 $4.8 $4.2 $5.0
Principal Investments ($1.4) $0.8 $1.3 $0.5 $0.5 $0.5 $0.3 $0.3 ($3.9) $1.2 $1.6 $1.3
Asset Mgmt & Sec Svc $1.0 $1.0 $1.0 $1.2 $1.0 $1.0 $1.0 $1.3 $4.7 $4.1 $4.3 $4.8
Pre-Tax Margins
Investment Banking 14.3% 19.0% 14.1% 46.0% 19.8% 20.0% 20.0% 20.0% 39.4% 26.5% 19.9% 20.0%
Trading and Principal 31.8% 41.7% 44.6% 94.7% 45.7% 26.0% 39.6% 58.0% -30.3% 50.4% 42.5% 48.1%
Asset Mgmt & Sec Svc 17.0% 18.7% 15.6% 37.2% 19.5% 18.0% 18.0% 18.0% 38.1% 22.4% 18.3% 18.0%
Total Pre-Tax Margin 27.9% 36.5% 38.7% 76.7% 40.4% 24.2% 34.4% 45.8% 10.5% 43.9% 36.7% 40.9%
Total Capital $252 $254 $255 $256 -- -- -- -- $233 -- -- --
Total Equity $64 $63 $65 $71 $73 $75 $77 $80 $64 $71 $80 $92
AUM $771 $819 $848 $871 $840 $838 $862 $885 $779 $852 $866 $976
Y/Y Comparisons
Revenue by Product
Equities (20.4%) 27.8% 77.7% (26.9%) 17.6% (54.4%) (36.9%) (9.4%) (18.6%) 7.4% (26.1%) 28.8%
Fixed Income 108.7% 185.6% 275.6% (216.7%) 12.6% (32.5%) (12.2%) 5.9% (77.0%) 528.0% (8.1%) 13.5%
Investment Banking (29.8%) (14.5%) (30.5%) 58.1% 43.9% (48.4%) 18.4% (23.8%) (31.4%) (7.5%) (11.7%) 17.1%
Principal Investments 164.7% 11.9% (378.4%) (114.1%) (136.2%) (37.8%) (78.6%) (45.9%) (202.6%) (130.4%) 33.1% (18.3%)
Asset Mgmt & Sec Svc (26.2%) (21.6%) (16.4%) 24.1% (1.1%) 4.3% 6.9% 10.7% (1.2%) (12.5%) 5.4% 10.2%
Source: Company reports, Barclays Capital estimates

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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) 1.212.526.9937 steven.truong@barcap.com
Hill, Kenneth (BCI, New York) 1.212.526.7179 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.

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 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) US$ 134.79 (21-Jun-2010) 2-Equal Weight / 2-Neutral
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

6-07 9-07 12-07 3-08 6-08 9-08 12-08 3-09 6-09 9-09 12-09 3-10 6-10
Closing Price Price Target
Recommendation Change Drop Coverage
Source: FactSet
Currency=US$
Date Closing Price Rating Price Target Date Closing Price Rating Price Target
16-Oct-09 184.37 195.00 19-Mar-08 166.49 213.00
05-Jun-09 149.01 165.00 14-Feb-08 176.56 229.00
15-Apr-09 121.19 105.00 06-Dec-07 222.51 234.00
09-Mar-09 73.95 100.00 21-Sep-07 209.98 226.00
10-Nov-08 71.21 135.00 30-Aug-07 171.38 214.00
26-Sep-08 137.99 170.00 15-Jun-07 226.19 238.00
19-Sep-08 129.80 175.00
03-Apr-08 176.53 200.00
FOR EXPLANATIONS OF RATINGS REFER TO THE STOCK RATING KEYS LOCATED ON THE PAGE FOLLOWING THE LAST PRICE CHART.
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

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 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 Ticker Price Price Date Stock / Sector Rating

Goldman Sachs Group Inc. GS US$ 134.79 21-Jun-2010 2-Equal Weight / 2-Neutral

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1-Positive - sector coverage universe fundamentals/valuations are improving.
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 Equity Research
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