Goldman Sachs (GS.US) CEO: The recovery of M&A activity supports surpassing return targets, with the asset management division aiming for a 19% return rate

Goldman Sachs CEO David Solomon has stated that the recovery of M&A deals and growth in wealth management and alternative investments will help the company surpass its return targets.

In a letter to shareholders on Friday, Solomon wrote, “As the regulatory environment changes, boards and CEOs believe they are more likely to pursue strategic transactions to scale or enhance their competitive position.” He also added that executives are adopting a “more proactive” approach to deal-making.

Goldman said, “We are confident in achieving an approximately 15% return throughout the economic cycle and exceeding these targets in the short term.”

The letter also mentioned that Goldman plans for its asset and wealth management divisions to achieve a return of 17% to 19% over the next three to five years. It noted that Goldman will “seek various avenues” to develop its asset and wealth management business, but “merger and acquisition thresholds remain high.”

The report pointed out that, given geopolitical tensions, policy uncertainties, and the widespread market volatility triggered by artificial intelligence, achieving expected returns “is not without challenges.” This anxiety has also affected private credit firms, with investors increasingly worried that these lenders are overly reliant on software companies that could be displaced by AI, and concerns about deteriorating credit quality.

Solomon wrote that these concerns “remind us that the credit cycle is not over.” He stated that greater market volatility underscores the need for “cautious risk management,” which is a focus for Goldman.

Looking ahead, Solomon said that as more companies deploy such technologies and investments grow, the benefits of AI will “gradually become apparent.” He wrote, “Every new technology has winners and losers.”

Goldman is actively working to integrate AI into six initial areas of its business: client onboarding, vendor management, regulatory reporting, lending, enterprise risk management, and sales.

Last year, the company told employees that as it further cuts costs across various divisions and capitalizes on AI opportunities, more layoffs are expected.