GSGoldman Sachs Group, Inc. (The)

Goldman Sachs is an investment bank: deal advisory, underwriting and markets trading rather than retail lending.

The main income sources are fees for arranging mergers and securities offerings, and the outcome of trading in bonds, currencies, commodities and equities. Both are cyclical: deal activity depends on the cost of money and corporate confidence, while trading results depend on market volatility.

The third line is asset and wealth management. It produces steadier fee income and is therefore strategically important: the bank has spent years trying to grow its share to reduce dependence on the market cycle. An attempt to enter retail banking proved expensive and was wound down.

The risks are specific: results depend heavily on a few dozen large transactions a year, and compensation is a large share of costs that rises in good years. Regulatory capital requirements constrain distributions. The bank pays a dividend and buys back stock.