GOLDMAN SACHS GROUP INC

The composition of our net revenues has varied over time as financial markets and the scope of our operations have changed. The composition of net revenues can also vary over the shorter term due to fluctuations in U.S. and global economic and market conditions. See “Risk Factors” in Part I, Item 1A of this Form 10-K for further information about the impact of economic and market conditions on our results of operations. For a discussion of our 2022 financial results compared with 2021, see Part II, Item 7 "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022.

Financial Overview

The table below presents an overview of our financial results and selected financial ratios.

Our target (through-the-cycle) is to achieve ROE within a range of 14% to 16% and ROTE within a range of 15% to 17%.

•Net earnings to common represents net earnings applicable to common shareholders, which is calculated as net earnings less preferred stock dividends.

•ROE is calculated by dividing net earnings to common by average monthly common shareholders’ equity.

•ROTE is calculated by dividing net earnings to common by average monthly tangible common shareholders’ equity. Tangible common shareholders’ equity is calculated as total shareholders’ equity less preferred stock, goodwill and identifiable intangible assets. We believe that tangible common shareholders’ equity is meaningful because it is a measure that we and investors use to assess capital adequacy and that ROTE is meaningful because it measures the performance of businesses consistently, whether they were acquired or developed internally. Tangible common shareholders’ equity and ROTE are non-GAAP measures and may not be comparable to similar non-GAAP measures used by other companies.

The table below presents our average equity and the reconciliation of average common shareholders’ equity to average tangible common shareholders’ equity.

•Net earnings to average assets is calculated by dividing net earnings by average total assets.

•Return on shareholders’ equity is calculated by dividing net earnings by average monthly shareholders’ equity.

•Average equity to average assets is calculated by dividing average total shareholders’ equity by average total assets.

•Dividend payout ratio is calculated by dividing dividends declared per common share by diluted EPS.

Net Revenues

The table below presents our net revenues by line item.

•Investment banking consists of revenues (excluding net interest) from financial advisory and underwriting assignments. These activities are included in Global Banking & Markets.

•Investment management consists of revenues (excluding net interest) from providing asset management and wealth advisory services across all major asset classes to a diverse set of clients. These activities are included in Asset & Wealth Management.

•Commissions and fees consists of revenues from executing and clearing client transactions on major stock, options and futures exchanges worldwide, as well as over-the-counter (OTC) transactions. Substantially all of these activities are included in Global Banking & Markets.

•Market making consists of revenues (excluding net interest) from client execution activities related to making markets in interest rate products, credit products, mortgages, currencies, commodities and equity products. These activities are included in Global Banking & Markets.

•Other principal transactions consists of revenues (excluding net interest) from our equity investing activities, including revenues related to our consolidated investments (included in Asset & Wealth Management), and debt investing and lending activities (included across our three segments).

Operating Environment. During 2023, the operating environment continued to be generally characterized by continued broad macroeconomic concerns, including the outlook for economic growth and inflation, and elevated geopolitical tensions. These factors weighed on industry-wide investment banking activity levels and market-making activity levels, and contributed to pressure in the commercial real estate market. However, improvements in the outlook for economic conditions contributed to generally higher global equity and bond prices compared with the end of 2022. In the U.S., inflationary measures improved, the rate of unemployment remained low and the pace of growth in consumer spending declined slightly compared with 2022.

If uncertainty and concerns about geopolitical tensions and the economic outlook remain elevated or grow, including those about global central bank policy, inflation, the commercial real estate sector, and potential increases in regulatory capital requirements, it may lead to a decline in asset prices, a further decline in market-making activity levels, or a further decline in investment banking activity levels, and net revenues and provision for credit losses would likely be negatively impacted. See “Segment Assets and Operating Results — Segment Operating Results” for information about the operating environment and material trends and uncertainties that may impact our results of operations.

2023 versus 2022

Net revenues in the consolidated statements of earnings were $46.25 billion for 2023, 2% lower than 2022, primarily reflecting lower net interest income and lower investment banking revenues, partially offset by significantly higher net revenues in other principal transactions.

Non-Interest Revenues. Investment banking revenues in the consolidated statements of earnings were $6.22 billion for 2023, 16% lower than 2022, primarily due to significantly lower revenues in advisory, reflecting a significant decline in industry-wide completed mergers and acquisitions transactions, partially offset by significantly higher revenues in equity underwriting, primarily reflecting increased activity from secondary offerings.

Investment management revenues in the consolidated statements of earnings were $9.53 billion for 2023, 6% higher than 2022, due to higher management and other fees, primarily reflecting the impact of higher average AUS, including the impact of acquiring NN Investment Partners (NNIP).

Commissions and fees in the consolidated statements of earnings were$3.79 billion for 2023, 6% lower than 2022, primarily reflecting the impact of GreenSky in the prior year period.

Market making revenues in the consolidated statements of earnings were $18.24 billion for 2023, 2% lower than 2022, reflecting significantly lower revenues in FICC and Equities intermediation, largely offset by significantly higher revenues in FICC and Equities financing. The decrease from intermediation activities reflected significantly lower revenues in equity derivatives, commodities and currencies, partially offset by significantly improved results in mortgages. The increase from financing activities primarily reflected significantly higher revenues from equity financing.

Other principal transactions revenues in the consolidated statements of earnings were $2.13 billion for 2023, 225% higher than 2022, primarily reflecting net gains from derivatives related to our borrowings.

Net Interest Income. Net interest income in the consolidated statements of earnings was $6.35 billion for 2023, 17% lower than 2022, reflecting a significant increase in interest expense primarily related to other interest-bearing liabilities, deposits, collateralized financings, and borrowings, each reflecting the impact of higher average interest rates. The increase in interest expense was partially offset by a significant increase in interest income primarily related to collateralized agreements, other interest-earning assets, deposits with banks, and loans, each reflecting the impact of higher average interest rates. See “Supplemental Financial Information—Statistical Disclosures— Distribution of Assets, Liabilities and Shareholders’ Equity” for further information about our sources of net interest income.

Provision for Credit Losses

Provision for credit losses consists of provision for credit losses on financial assets and commitments accounted for at amortized cost, including loans and lending commitments held for investment. See Note 9 to the consolidated financial statements for further information about the provision for credit losses on loans and lending commitments.

The table below presents our provision for credit losses.

2023 versus 2022. Provision for credit losses in the consolidated statements of earnings was $1.03 billion for 2023, compared with $2.72 billion for 2022. Provisions for 2023 reflected net provisions related to both the credit card portfolio (primarily driven by net charge-offs) and wholesale loans (primarily driven by impairments). These net provisions were partially offset by reserve reductions of $637 million related to the transfer of the GreenSky installment loan portfolio to held for sale and $442 million related to the sale of substantially all of the Marcus loans portfolio. Provisions for 2022 primarily reflected growth in the credit card portfolio, the impact of macroeconomic and geopolitical concerns and net charge-offs.

Operating Expenses

Our operating expenses are primarily influenced by compensation, headcount and levels of business activity. Compensation and benefits includes salaries, year-end discretionary compensation, amortization of equity awards and other items such as benefits. Discretionary compensation is significantly impacted by, among other factors, the level of net revenues, net of provision for credit losses, overall financial performance, prevailing labor markets, business mix, the structure of our share-based compensation programs and the external environment.

The table below presents our operating expenses by line item and headcount.

2023 versus 2022. Operating expenses in the consolidated statements of earnings were $34.49 billion for 2023, 11% higher than 2022. Our efficiency ratio was 74.6% for 2023, compared with 65.8% for 2022.

The increase in operating expenses compared with 2022 primarily reflected significantly higher impairments related to commercial real estate within CIEs ($1.46 billion recognized in 2023), a write-down of identifiable intangible assets of $506 million related to GreenSky and an impairment of goodwill of $504 million related to Consumer platforms (all in depreciation and amortization), as well as the FDIC special assessment fee of $529 million (in other expenses). Net provisions for litigation and regulatory proceedings were $115 million for 2023 compared with $576 million for 2022.

As of December 2023, headcount decreased 7% compared with December 2022, primarily reflecting a headcount reduction initiative during the year.

Provision for Taxes

The effective income tax rate for 2023 was 20.7%, up from the full year income tax rate of 16.5% for 2022, primarily resulting from an increase in taxes on non-U.S. earnings in 2023, partially offset by an increase in the impact of permanent tax benefits for 2023 compared with 2022.

In May 2023, the New York State fiscal year 2024 budget was enacted. The legislation extends the temporary increase in the New York State corporate income tax rate from 6.5% to 7.25% through calendar year 2026. In December 2023, the New York State Department of Taxation and Finance published final regulations that implemented comprehensive franchise tax reform for corporations, banks and insurance companies, which was enacted in 2014. The legislation and final regulations did not have a material impact on our 2023 annual effective tax rate and are not expected to have a material impact on our 2024 annual effective tax rate.

The Organisation for Economic Co-operation and Development (OECD) Global Anti-Base Erosion Model Rules (Pillar II) aim to ensure that multinationals with revenues in excess of EUR 750 million pay a minimum effective corporate tax rate of 15% in each jurisdiction in which they operate. The U.K. and other jurisdictions in which we operate have adopted certain portions of the OECD directive (Pillar II legislation) effective beginning in calendar year 2024. In February 2023, the U.S. Financial Accounting Standards Board released guidance that it believes Pillar II is an alternative minimum tax, and therefore deferred tax assets and liabilities should not be remeasured for its estimated future effects and any additional tax should be recognized in the period incurred. We do not expect the impact on our 2024 annual effective tax rate to be material.

We expect our 2024 tax rate to be approximately 22%, including the impact of any Pillar II taxes, based on our current interpretation of the guidance published by the OECD and enacted legislation.

Segment Assets and Operating Results

Segment Assets. The table below presents assets by segment.

The allocation process for segment assets is based on the activities of these segments. The allocation of assets includes allocation of GCLA (which consists of unencumbered, highly liquid securities and cash), which is generally included within cash and cash equivalents, collateralized agreements and trading assets on our balance sheet. Due to the integrated nature of these segments, estimates and judgments are made in allocating these assets. See “Risk Management — Liquidity Risk Management” for further information about our GCLA.

Segment Operating Results. The table below presents our segment operating results.

Net revenues in our segments include allocations of interest income and expense to specific positions in relation to the cash generated by, or funding requirements of, such positions. See Note 25 to the consolidated financial statements for further information about our business segments.

The allocation of common shareholders’ equity and preferred stock dividends to each segment is based on the estimated amount of equity required to support the activities of the segment under relevant regulatory capital requirements. Net earnings for each segment is calculated by applying the firmwide tax rate to each segment’s pre-tax earnings.

Compensation and benefits expenses within our segments reflect, among other factors, our overall performance, as well as the performance of individual businesses. Consequently, pre-tax margins in one segment of our business may be significantly affected by the performance of our other business segments. A description of segment operating results follows.

Global Banking & Markets generates revenues from the following:

Investment banking fees. We provide advisory and underwriting services and help companies raise capital to strengthen and grow their businesses. Investment banking fees includes the following:

•Advisory. Includes strategic advisory assignments with respect to mergers and acquisitions, divestitures, corporate defense activities, restructurings and spin-offs.

•Underwriting. Includes public offerings and private placements in both local and cross-border transactions of a wide range of securities and other financial instruments, including acquisition financing.

FICC. FICC generates revenues from intermediation and financing activities.

•FICC intermediation. Includes client execution activities related to making markets in both cash and derivative instruments, as detailed below.

Interest Rate Products. Government bonds (including inflation-linked securities) across maturities, other government-backed securities, and interest rate swaps, options and other derivatives.

Credit Products. Investment-grade and high-yield corporate securities, credit derivatives, exchange-traded funds (ETFs), bank and bridge loans, municipal securities, distressed debt and trade claims.

Mortgages. Commercial mortgage-related securities, loans and derivatives, residential mortgage-related securities, loans and derivatives (including U.S. government agency-issued collateralized mortgage obligations and other securities and loans), and other asset-backed securities, loans and derivatives.

Currencies. Currency options, spot/forwards and other derivatives on G-10 currencies and emerging-market products.

Commodities. Commodity derivatives and, to a lesser extent, physical commodities, involving crude oil and petroleum products, natural gas, agricultural, base, precious and other metals, electricity, including renewable power, environmental products and other commodity products.

•FICC financing. Includes (i) secured lending to our clients through structured credit and asset-backed lending, including warehouse loans backed by mortgages (including residential and commercial mortgage loans), corporate loans and consumer loans (including auto loans and private student loans), (ii) financing through securities purchased under agreements to resell (resale agreements) and (iii) commodity financing to clients through structured transactions.

Equities. Equities generates revenues from intermediation and financing activities.

•Equities intermediation. We make markets in equity securities and equity-related products, including ETFs, convertible securities, options, futures and OTC derivative instruments. We also structure and make markets in derivatives on indices, industry sectors, financial measures and individual company stocks. Our exchange-based market-making activities include making markets in stocks and ETFs, futures and options on major exchanges worldwide. In addition, we generate commissions and fees from executing and clearing institutional client transactions on major stock, options and futures exchanges worldwide, as well as OTC transactions.

•Equities financing. Includes prime financing, which provides financing to our clients for their securities trading activities through margin loans that are collateralized by securities, cash or other collateral. Prime financing also includes services which involve lending securities to cover institutional clients’ short sales and borrowing securities to cover our short sales and to make deliveries into the market. We are also an active participant in broker-to-broker securities lending and third-party agency lending activities. In addition, we execute swap transactions to provide our clients with exposure to securities and indices. Financing activities also include portfolio financing, which clients can utilize to manage their investment portfolios, and other equity financing activities, including securities-based loans to individuals.

Market-Making Activities

As a market maker, we facilitate transactions in both liquid and less liquid markets, primarily for institutional clients, such as corporations, financial institutions, investment funds and governments, to assist clients in meeting their investment objectives and in managing their risks. In this role, we seek to earn the difference between the price at which a market participant is willing to sell an instrument to us and the price at which another market participant is willing to buy it from us, and vice versa (i.e., bid/offer spread). In addition, we maintain (i) market-making positions, typically for a short period of time, in response to, or in anticipation of, client demand, and (ii) positions to actively manage our risk exposures that arise from these market-making activities (collectively, inventory). Our inventory is recorded in trading assets (long positions) or trading liabilities (short positions) in our consolidated balance sheets.

Our results are influenced by a combination of interconnected drivers, including (i) client activity levels and transactional bid/offer spreads (collectively, client activity), and (ii) changes in the fair value of our inventory and interest income and interest expense related to the holding, hedging and funding of our inventory (collectively, market-making inventory changes). Due to the integrated nature of our market-making activities, disaggregation of net revenues into client activity and market-making inventory changes is judgmental and has inherent complexities and limitations.

The amount and composition of our net revenues vary over time as these drivers are impacted by multiple interrelated factors affecting economic and market conditions, including volatility and liquidity in the market, changes in interest rates, currency exchange rates, credit spreads, equity prices and commodity prices, investor confidence, and other macroeconomic concerns and uncertainties.

In general, assuming all other market-making conditions remain constant, increases in client activity levels or bid/offer spreads tend to result in increases in net revenues, and decreases tend to have the opposite effect. However, changes in market-making conditions can materially impact client activity levels and bid/offer spreads, as well as the fair value of our inventory. For example, a decrease in liquidity in the market could have the impact of (i) increasing our bid/offer spread, (ii) decreasing investor confidence and thereby decreasing client activity levels, and (iii) widening of credit spreads on our inventory positions.

Other. We lend to corporate clients, including through relationship lending and acquisition financing. The hedges related to this lending and financing activity are also reported as part of Other. Other also includes equity and debt investing activities related to our Global Banking & Markets activities.

The table below presents our Global Banking & Markets assets.

The table below presents details about our Global Banking & Markets loans.

Our average Global Banking & Markets gross loans were $112.07 billion for 2023 and $105.11 billion for 2022.

The table below presents our Global Banking & Markets operating results.

The table below presents our FICC and Equities net revenues by line item in the consolidated statements of earnings.

•See “Net Revenues” for information about market making revenues, commissions and fees, other principal transactions revenues and net interest income. See Note 25 to the consolidated financial statements for net interest income by segment.

•The primary driver of net revenues for FICC intermediation for all periods was client activity.

The table below presents our financial advisory and underwriting transaction volumes.

•Volumes are per Dealogic.

•Announced and completed mergers and acquisitions volumes are based on full credit to each of the advisors in a transaction. Equity and equity-related and debt offerings are based on full credit for single book managers and equal credit for joint book managers. Transaction volumes may not be indicative of net revenues in a given period. In addition, transaction volumes for prior periods may vary from amounts previously reported due to the subsequent withdrawal or a change in the value of a transaction.

•Equity and equity-related offerings includes Rule 144A and public common stock offerings, convertible offerings and rights offerings.

•Debt offerings includes non-convertible preferred stock, mortgage-backed securities, asset-backed securities and taxable municipal debt. It also includes publicly registered and Rule 144A issues and excludes leveraged loans.

Operating Environment. During 2023, Global Banking & Markets operated in an environment generally characterized by continued broad macroeconomic concerns, including the outlook for economic growth and inflation, and elevated geopolitical stresses. These factors weighed on industry-wide investment banking activity levels and market-making activity levels.

In investment banking, industry-wide completed mergers and acquisitions transactions declined compared with elevated levels in the prior year, while industry-wide equity and debt underwriting volumes remained below historical averages.

In interest rates, the yields on 10-year U.S. and U.K government bonds increased during the middle of the year before declining to yields near where they ended in 2022. In equities, the S&P 500 Index increased by 24% and the MSCI World Index increased by 20% compared with the end of 2022.

In the future, if market and economic conditions deteriorate, and market-making activity levels decline further or investment banking activity levels decline further, or credit spreads related to hedges on our relationship lending portfolio tighten, net revenues in Global Banking & Markets would likely be negatively impacted. In addition, if economic conditions deteriorate further or if the creditworthiness of borrowers deteriorates, provision for credit losses would likely be negatively impacted.

2023 versus 2022. Net revenues in Global Banking & Markets were $30.00 billion for 2023, 8% lower than a strong 2022.

Investment banking fees were $6.22 billion, 16% lower than 2022, due to significantly lower net revenues in Advisory, reflecting a significant decline in industry-wide completed mergers and acquisitions transactions, and slightly lower net revenues in Debt underwriting, partially offset by significantly higher net revenues in Equity underwriting, primarily reflecting increased activity from secondary offerings.

As of December 2023, our Investment banking fees backlog decreased compared with the end of 2022, due to significantly lower estimated net revenues from both potential equity underwriting transactions (primarily from initial public offerings) and potential debt underwriting transactions (primarily from structured finance offerings).

Our backlog represents an estimate of our net revenues from future transactions where we believe that future revenue realization is more likely than not. We believe changes in our backlog may be a useful indicator of client activity levels which, over the long term, impact our net revenues. However, the time frame for completion and corresponding revenue recognition of transactions in our backlog varies based on the nature of the assignment, as certain transactions may remain in our backlog for longer periods of time. In addition, our backlog is subject to certain limitations, such as assumptions about the likelihood that individual client transactions will occur in the future. Transactions may be cancelled or modified, and transactions not included in the estimate may also occur.

Net revenues in FICC were $12.06 billion, 18% lower than a strong 2022, reflecting significantly lower net revenues in FICC intermediation, driven by significantly lower net revenues in currencies and commodities and slightly lower net revenues in interest rate products, partially offset by significantly higher net revenues in mortgages and higher net revenues in credit products. Net revenues in FICC financing were slightly lower.

The decrease in FICC intermediation net revenues reflected significantly lower client activity (as activity in the prior year benefited from volatility in the macroeconomic environment). The following provides information about our FICC intermediation net revenues by business, compared with results for 2022:

•Net revenues in currencies, commodities and interest rate products primarily reflected lower client activity.

•Net revenues in mortgages and credit products primarily reflected the impact of improved market-making conditions on our inventory.

Net revenues in Equities were $11.55 billion, 5% higher than 2022, due to higher net revenues in Equities financing (reflecting significantly higher net revenues in prime financing), partially offset by slightly lower net revenues in Equities intermediation (reflecting lower net revenues in cash products).

Net revenues in Other were $171 million, compared with $(537) million for 2022, reflecting the absence of net mark-downs on acquisition financing activities included in the prior year and net gains from direct investments compared with net losses in the prior year. These improvements were partially offset by significantly higher net losses on hedges.

Provision for credit losses was $401 million for 2023, compared with $468 million for 2022. Provisions for 2023 primarily reflected net provisions related to the commercial real estate portfolio. Provisions for 2022 primarily reflected the impact of broad macroeconomic and geopolitical concerns.

Operating expenses were $18.04 billion for 2023, essentially unchanged compared with 2022. Pre-tax earnings were $11.56 billion for 2023, 18% lower than 2022.

Asset & Wealth Management provides investment services to help clients preserve and grow their financial assets and achieve their financial goals. We provide these services to our clients, both institutional and individuals, including investors who primarily access our products through a network of third-party distributors around the world.

We manage client assets across a broad range of investment strategies and asset classes, including equity, fixed income and alternative investments. We provide investment solutions, including those managed on a fiduciary basis by our portfolio managers, as well as those managed by third-party managers. We offer our investment solutions in a variety of structures, including separately managed accounts, mutual funds, private partnerships and other commingled vehicles.

We also provide tailored wealth advisory services to clients across the wealth spectrum. We operate globally, serving individuals, families, family offices, and foundations and endowments. Our relationships are established directly or introduced through companies that sponsor financial wellness or financial planning programs for their employees, as well as through corporate referrals. During 2023, we sold our Personal Financial Management (PFM) business.

We offer personalized financial planning to individuals and also provide customized investment advisory solutions, and offer structuring and execution capabilities in securities and derivative products across all major global markets. In addition, we offer clients a full range of private banking services, including a variety of deposit alternatives and loans that our clients use to finance investments in both financial and nonfinancial assets, bridge cash flow timing gaps or provide liquidity and flexibility for other needs.

We invest alongside our clients that invest in investment funds that we raise or manage. We also have investments in alternative assets across a range of asset classes. Our investing activities, which are typically longer-term, include investments in corporate equity, credit, real estate and infrastructure assets.

We also raise deposits and have issued unsecured loans to consumers through Marcus. During 2023, we completed the sale of substantially all of the Marcus loans portfolio.

Asset & Wealth Management generates revenues from the following:

•Management and other fees. We receive fees related to managing assets for institutional and individual clients, providing investing and wealth advisory solutions, providing financial planning and counseling services, and executing brokerage transactions for wealth management clients. The vast majority of revenues in management and other fees consists of asset-based fees on client assets that we manage. For further information about assets under supervision, see “Assets Under Supervision” below. The fees that we charge vary by asset class, client channel and the types of services provided, and are affected by investment performance, as well as asset inflows and redemptions.

•Incentive fees. In certain circumstances, we also receive incentive fees based on a percentage of a fund’s or a separately managed account’s return, or when the return exceeds a specified benchmark or other performance targets. Such fees include overrides, which consist of the increased share of the income and gains derived primarily from our private equity and credit funds when the return on a fund’s investments over the life of the fund exceeds certain threshold returns.

•Private banking and lending. Our private banking and lending activities include issuing loans to our wealth management clients. We also accept deposits from wealth management clients, including through Marcus. We also issued unsecured loans to consumers through Marcus. During the first half of 2023, we completed the sale of substantially all of this portfolio. Additionally, we provide investing services through Marcus Invest to U.S. customers. Private banking and lending revenues include net interest income allocated to deposits and net interest income earned on loans to individual clients.

•Equity investments. Includes investing activities related to our asset management activities primarily related to public and private equity investments in corporate, real estate and infrastructure assets. We also make investments through CIEs, substantially all of which are engaged in real estate investment activities. In addition, we make investments in connection with our activities to satisfy requirements under the Community Reinvestment Act, primarily through our Urban Investment Group.

•Debt investments. Includes lending activities related to our asset management activities, including investing in corporate debt, lending to middle-market clients, and providing financing for real estate and other assets. These activities include investments in mezzanine debt, senior debt and distressed debt securities.

The table below presents our Asset & Wealth Management assets.

The table below presents details about our Asset & Wealth Management loans.

The average Asset & Wealth Management gross loans were $51.98 billion for 2023 and $59.35 billion for 2022.

The table below presents our Asset & Wealth Management operating results.

Our target is to achieve annual firmwide management and other fees of more than $10 billion in 2024. This includes more than $2 billion from alternatives, which was surpassed in 2023.

Our target is to achieve pre-tax margins in the mid-twenties and ROE in the mid-teens within the medium term (three to five year time horizon from year-end 2022) for Asset & Wealth Management.

The table below presents our Asset management and Wealth management net revenues by line item in Asset & Wealth Management.

The table below presents our Equity investments net revenues by equity type and asset class.

The table below presents details about our Debt investments net revenues.

Operating Environment. During 2023, Asset & Wealth Management operated in an environment generally characterized by continued broad macroeconomic concerns, including pressure in the commercial real estate market. However, improvements in the outlook for economic conditions contributed to generally higher global equity and bond prices compared with the end of 2022, positively affecting assets under supervision.

In the future, if market and economic conditions deteriorate, it may lead to a decline in asset prices, or investors transitioning to asset classes that typically generate lower fees or withdrawing their assets, and net revenues in Asset & Wealth Management would likely be negatively impacted.

2023 versus 2022. Net revenues in Asset & Wealth Management were $13.88 billion for 2023, 4% higher than 2022, reflecting higher Management and other feesand higher net revenues in Debt investments and Private banking and lending, partially offset by significantly lower net revenues in Equity investments and significantly lower Incentive fees.

The increase in Management and other fees primarily reflected the impact of higher average assets under supervision, including the impact of acquiring NNIP. The increase in Debt investments net revenues reflected significantly lower net mark-downs compared with the prior year (despite a challenging environment for real estate investments in the current year), partially offset by lower net interest income due to a reduction in the debt investments balance sheet. The increase in Private banking and lending net revenues primarily reflected higher deposit spreads and balances, partially offset by the impact of the sale of substantially all of the Marcus loans portfolio in the year. The decrease in Equity investments net revenues reflected significantly lower net gains from investments in private equities, primarily due to net losses from real estate investments, partially offset by significantly lower net losses from investments in public equities. The decrease in Incentive fees was driven by more significant harvesting in the prior year.

Provision for credit losses was a net benefit of $508 million for 2023, compared with a provision of $519 million for 2022. The net benefit for 2023 primarily reflecteda reserve reduction of $442 million related to the sale of substantially all of the Marcus loans portfolio and lower balances in corporate loans due to sales and paydowns, partially offset by impairments. Provisions for 2022 primarily reflected the impact of macroeconomic and geopolitical concerns.

Operating expenses were $13.03 billion for 2023, 13% higher than 2022, largely due to significantly higher impairments related tocommercial real estate within CIEs. Pre-tax earnings were $1.36 billion for 2023, 4% higher than 2022.

Assets Under Supervision. AUS includes our institutional clients’ assets, assets sourced through third-party distributors and high-net-worth clients’ assets where we earn a fee for managing assets on a discretionary basis. This includes net assets in our mutual funds, hedge funds, credit funds, private equity funds, real estate funds, and separately managed accounts for institutional and individual investors. AUS also includes client assets invested with third-party managers, private bank deposits and advisory relationships where we earn a fee for advisory and other services, but do not have investment discretion. AUS does not include the self-directed brokerage assets of our clients.

The table below presents information about our firmwide period-end AUS by asset class, client channel, region and vehicle.

•Liquidity products includes money market funds and private bank deposits.

•EMEA represents Europe, Middle East and Africa.

The table below presents changes in our AUS.

In the table above, dispositions for 2023 included outflows from the disposition of PFM, with substantially all of the outflows in equity and fixed income assets. Acquisitions for 2022 included inflows from the acquisitions of NNIP and NextCapital Group, Inc., and from the acquisition of the assets of Bombardier Global Pension Asset Management Inc. For each, substantially all of the inflows were in fixed income and equity assets.

The table below presents information about our average monthly firmwide AUS by asset class.

In addition to our AUS, we have discretion over alternative investments where we currently do not earn management fees (non-fee-earning alternative assets).

We earn management fees on client assets that we manage and also receive incentive fees based on a percentage of a fund’s or a separately managed account’s return, or when the return exceeds a specified benchmark or other performance targets. These incentive fees are recognized when it is probable that a significant reversal of such fees will not occur. Our estimated unrecognized incentive fees were $3.77 billion as of December 2023, $3.33 billion as of December 2022 and $3.39 billion as of December 2021. Such amounts are based on the completion of the funds’ financial statements, which is generally one quarter in arrears. These fees will be recognized, assuming no decline in fair value, if and when it is probable that a significant reversal of such fees will not occur, which is generally when such fees are no longer subject to fluctuations in the market value of the assets.

The table below presents our average effective management fee (which excludes non-asset-based fees) earned on our firmwide AUS by asset class.

In the table above, our average effective management fee for liquidity products increased during both 2023 and 2022 compared to 2021, primarily reflecting higher management fee waivers in 2021.

The table below presents details about our monthly average AUS for alternative investments and the average effective management fee we earned on such assets.

In the table above, direct strategies primarily includes our private equity, growth equity, private credit, liquid alternatives and real estate strategies. Fund of funds primarily includes our business which invests in leading private equity, hedge fund, real estate and credit third-party managers as a limited partner, secondary-market investor, co-investor or management company partner.

The table below presents information about our period-end AUS for alternative investments, non-fee-earning alternative investments and total alternative investments.

•Corporate equity primarily includes private equity.

•Total alternative assets included uncalled capital that is available for future investing of $58 billion as of December 2023, $54 billion as of December 2022 and $42 billion as of December 2021.

•Non-fee-earning alternative assets primarily includes investments that we hold on our balance sheet, our unfunded commitments, unfunded commitments of our clients (where we do not charge fees on commitments), credit facilities collateralized by fund assets and employee funds. Our calculation of non-fee-earning alternative assets may not be comparable to similar calculations used by other companies.

•Non-fee-earning alternative assets primarily includes our direct investing strategies, including private equity, growth equity, private credit and real estate strategies.

We announced a strategic objective of growing our third-party alternatives business and established a target of achieving gross inflows of $225 billion for alternative investments from 2020 through the end of 2024. We surpassed this target in 2023.

The table below presents information about third-party commitments raised in our alternatives business from 2020 through 2023.

In the table above, commitments included in non-fee-earning alternative assets included approximately $56 billion, which will begin to earn fees (and become AUS) if and when the commitments are drawn and assets are invested.

The table below presents information about alternative investments in Asset & Wealth Management that we hold on our balance sheet by asset type.

The table below presents further information about our alternative investments in Asset & Wealth Management that we hold on our balance sheet.

•Client co-invest primarily includes our investments in funds that we raise and manage or where we have invested alongside the third-party investors.

•Firmwide initiatives primarily includes our investments related to the Community Reinvestment Act and our sponsored initiatives, such as One Million Black Women.

•Historical principal investments includes our remaining balance sheet alternative investments portfolio that we plan to reduce. Our target is to reduce this portfolio to less than $15 billion by the end of 2024 and to exit this portfolio over the medium term (three to five year time horizon from year-end 2022).

The table below presents the rollforward of our alternative investments categorized as historical principal investments for 2023.

In the table above, dispositions included approximately $1.2 billion of investments that were transferred out of historical principal investments, primarily to Global Banking & Markets.

The table below presents the commercial real estate investments in Asset & Wealth Management that we hold on our balance sheet.

•Office-related investments included in loans were $0.2 billion, in debt securities were $0.1 billion, in equity securities were $0.3 billion, and in CIE investments, net of financings, were $0.6 billion.

•Office-related equity securities and CIE investments, net of financings, were marked down or impaired by approximately 50% during 2023 and non-office-related equity securities and CIE investments, net of financings, were marked down or impaired by approximately 15% during 2023.

•Commercial real estate investments consisted of approximately 38% of historical principal investments, which we intend to exit over the medium term (three to five year time horizon from year-end 2022).

Loans and Debt Securities. The table below presents the concentration of loans and debt securities within our alternative investments by accounting classification, region and industry.

Equity Securities. The table below presents the concentration of equity securities within our alternative investments by region and industry.

•Equity securities included $12.1 billion as of December 2023 and $13.0 billion as of December 2022 of private equity positions, and $1.1 billion as of December 2023 and $1.7 billion as of December 2022 of public equity positions that converted from private equity upon the initial public offerings of the underlying companies.

•The concentrations for real estate equity securities as of December 2023 were 13% for multifamily (9% as of December 2022), 2% for office (5% as of December 2022), 8% for mixed use (8% as of December 2022) and 7% for other real estate equity securities (8% as of December 2022).

The table below presents the concentration of equity securities within our alternative investments by vintage.

CIE Investments and Other. CIE investments and other included assets held by CIEs of $5.9 billion as of December 2023 and $11.8 billion as of December 2022, which were funded with liabilities of approximately $3.5 billion as of December 2023 and $6.3 billion as of December 2022. Substantially all such liabilities were nonrecourse, thereby reducing our equity at risk.

The table below presents the concentration of CIE assets, net of financings, within our alternative investments by region and asset class.

In the table above, during the second quarter of 2023, certain CIE investments included within the other asset class were reclassified to the industrials asset class. Prior period amounts have been conformed to the current presentation.

The table below presents the concentration of CIE assets, net of financings, within our alternative investments by vintage.

Platform Solutions includes our consumer platforms, such as partnerships offering credit cards and point-of-sale financing, and transaction banking and other platform businesses.

Platform Solutions generates revenues from the following:

Consumer platforms. Our Consumer platforms business issues credit cards and provides point-of-sale financing through GreenSky to consumers to finance the purchases of goods or services. Consumer platforms revenues primarily includes net interest income earned on credit card lending and point-of-sale financing activities. We also accept deposits from Apple Card customers. In the fourth quarter of 2023, we entered into an agreement to sell GreenSky, which is expected to close in the first quarter of 2024, and also completed the sale of a majority of the GreenSky installment loan portfolio. In the fourth quarter of 2023, we also entered into an agreement with GM regarding a process to transition their credit card program to another issuer to be selected by GM.

Transaction banking and other. We provide transaction banking and other services, including cash management services, such as deposit-taking and payment solutions for corporate and institutional clients. Transaction banking revenues include net interest income attributed to transaction banking deposits.

The table below presents our Platform Solutions assets.

The table below presents details about our Platform Solutions loans.

The average Platform Solutions gross loans were $21.48 billion for 2023 and $12.43 billion for 2022.

The table below presents our Platform Solutions operating results.

Our target is to achieve pre-tax profitability by the end of 2025 for Platform Solutions.

Operating Environment. The operating environment for Platform Solutions is mainly impacted by the economic environment in the U.S., which, during 2023, was generally characterized by continued broad macroeconomic concerns, improved inflation measures, a continued low rate of unemployment and a slight decline in the pace of growth in consumer spending compared with 2022.

In the future, if economic conditions deteriorate, it may lead to a decrease in consumer spending or a deterioration in consumer credit, and net revenues and provision for credit losses in Platform Solutions would likely be negatively impacted.

2023 versus 2022. Net revenues in Platform Solutions were $2.38 billion for 2023, 58% higher than 2022, reflecting significantly higher net revenues in Consumer platforms.

The increase in Consumer platforms net revenues primarily reflected significant growth in average credit card balances. Transaction banking and other net revenues were lower, reflecting lower deposit spreads.

Provision for credit losses was $1.14 billion for 2023, compared with $1.73 billion for 2022. The net provision for 2023 reflected net provisions related to the credit card portfolio (primarily driven by net charge-offs), partially offset by a net release related to the GreenSky installment loan portfolio (including a reserve reduction of $637 million related to the transfer of the portfolio to held for sale). Provisions for 2022 primarily reflected growth in the credit card portfolio and net charge-offs.

Operating expenses were $3.42 billion for 2023, 94% higher than 2022, primarily due to a write-down of identifiable intangible assets of $506 million related to GreenSky and an impairment of goodwill of $504 million related to Consumer platforms. Pre-tax loss was $2.18 billion for 2023 compared with $1.99 billion for 2022.

Geographic Data

See Note 25 to the consolidated financial statements for a summary of our total net revenues, pre-tax earnings and net earnings by geographic region.