GS - Earnings call transcript Q2 2019 | The Goldman Sachs Group, Inc.

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Operator

Good morning. My name is Dennis, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs Second Quarter 2019 Earnings Conference Call. This call is being recorded today, July 16, 2019. Thank you. Ms. your begin may you conference. Miner,

Heather Miner

our call, is level Good the our be David Investor earnings of found Miner, our the this of on performance, the page Kennedy at morning. conference presentation, your Goldman of can On operating quarter by and This quarter Relations They Solomon; on second Sachs. results. Head our reference Stephen our our recent David? environment, take Officer, Chief current to update Sachs results Relations Heather discuss Welcome that. which may at over on will the we to give Investor each our site call. David. earnings in on call Chief high will second will Financial copyrighted earnings of Officer, be and release across Executive start strategy stress information our of the our or businesses. joined I'll audiocast now several material questions then happy and rebroadcast review I'm and is and statements consent. Web forward-looking will cover Scherr. No financial Group, Chairman The pass call, reproduced test duplicated, Today Goldman David an decisions after presentation. not www.gs.com. appear to and a non-GAAP Inc. be This without with Stephen measures

David Solomon

am be very Thanks Heather. to I And thanks happy morning. joining everyone with this you. for here us

Net of billion, equity earnings amid of a of All tangible down posted Let solid performance nonetheless versus operating in, but second on a equity share XXXX XX.X% environment. last reflecting on me quarter revenues of begin on return slightly per earnings $X.X resulting billion, X. return XX.X%. Page $X.XX. reported $X.X and We franchise we in were mixed year,

underwriting ranked year-to-date. one Banking, and Our business equity In future in and completed M&A number remained in we well solidly and announced for one global number Investment positioned growth. performed global

equity gains years, market second I&L its continues quarter highest four We broad making Our gains years, in revenues based produced quarterly market aided share regions. franchise in our generate and across business eight delivered to our the investment the record income which our and to activities net investing for and in billion. firm source ability private annualizes from by opportunities clients, debt significant interest - $X.X reflecting the equity I&L our

record under assets trillion. our by Lastly, increased $XX of another over to billion supervision $X.X

Page opportunities to second both our results on operating and X, generated an Turning quarter backdrop that challenges. were presented

to this more US reflected each the sentiment we sentiment, quarter continued we than solid approximately about of underlying expect bit the economic This fundamentals. subdued shifting more others market a changing witness in months. component globally. European in of growth at GDP remains This X.X% relatively Against X.X%. perhaps three X.X% growth real and year,

Client ECB X% turned in volatility and fixed dovish in activity nonetheless continued the inverted, most been on concerns variety deteriorated for this The Fed markets spurred and also central growth. activity catalyzed emphasizing and optimism uncertainty. caused low articulated prompting issues China concern stimulus All the a among march dovishness then May in quarter. prospects potential the remains appetite. slowing, announced. cuts up activity in stronger by erode corporate through markets expanding of set slowed investment range, low with trade This markets the further as the increased; close multiple backdrop of a strategic of quarter. in across clients year. in risk fundamentals in open the banks reported, many pause were out markets. anticipating transactions constructive. client We've Credit prevailed global of US sidelines. but turned quarter market income geopolitical The response, yield now particularly recently has supportive sentiment a the global still is volatility of the US increased quiet off, trade curve global relief our central the to rate in and while to a than amid stayed broadly are second and new products risk getting shift be wars The June significant Conditions as remain in across the geopolitical in the equity and and from banks, Japan backdrop Bank that strong macro sentiment that financing June running events accommodative has war, today. Fears seen late tariffs In client would The and albeit equity trade April in US-China markets. overshadowed continued in drove market continued Mexico China it is years, As views slower the global for growth. and upward rally global

markets. ahead, As look resiliency we global the front, we but on the remain of geopolitical optimistic given cautious

markets clients' and important made the across cycles. gears, to long-term provide alternatives quarter two we our to on second for our endure and wealth like insights in advice, financing, decisions businesses. some needs access Importantly, I'd in strategic Switching management

the special strengths several estate, our banking First, internal business. common investing Sachs past firm. completed for core recently is years, real XX under which and for More other have of merchant investing merchant situations specifically, on an our the group, realigned Goldman platforms activities reorganization we we alternatives, our banking, across

strong long-standing We record, have largest investing unique investors. and the a franchise institutional world-class relationships execution with and sourcing capabilities, with track a

our raise classes; will teams capital. private these party ability asset operate professionals, private together equity, third estate. four forward, and equity, Going credit, growth real across significant we bringing investment to By will accelerate our

recurring us based this This be generate fee transition. over enable time. will durable change a will more to revenues expect We

potential of businesses mindful these assets. of grow we the revenue are party protecting We third as

today, $XX goal offices United announced comprehensive of country. we under a the XX serves billion powerful Capital, strategic become the long-term advisory investment Second, corporations will approximately wealth services XXX Capital to key our management in the United largest registered plans complement States. the individuals assets Ayco Capital United a forward investment and Upon of step to counseling advisor providing toward executive our financial our supervision, across represents in to many leading closing with the wealth around business, advisers United business, acquire transaction spectrum. and which

million We us about basis, are United our and brings, billion assets with a set to allowing clients. wealth markets to excited mass serve through Ayco Ayco broader through combined under ultra-high base business. which Capital from scale to affluent will an of of clients United and serve mass digital segment that -- ambitious of through remains and investable it individuals a It a net-worth our human a ambition Individuals of grow PWM affluent time. supervision, assets broader remains the franchise. extension to incremental strong continue the over over $X million $XX wealth to $X management longstanding On representing as Capital of serve our hybrid engagement with

soundness financial Overall, would stress demonstrate ability stress the Stephen, which I $XXX to system. moment the industry turning examination. withstand to to billion test well the call the a From US of over safety the overall sit, in losses. fared Before clearly on late Reserve showed result Federal June, like where and recent of spend over results bank’s in test the year's I the released stress this

is Fed's efforts to economy of with US a increase the overall banking and that the system well the severe appreciate even support the sufficiently much to also ongoing assessment test shock. transparency the We capitalized the after very agree

specifically XXXX examination. on our performance Turning to the CCAR

fee-based X.XX% including are Federal billion to a to that up dividend. view component now of aware, dividend years critical board quarterly durable the the stock to object higher returns, change you our and return growth $X.X not more management over therefore disclosed reflects our capital As recent we common reflects is strong the support dividend. shareholder our delivering increase to and did a progress Reserve plan increasing This of on revenues

the touch I communication like quarters. our on Lastly, over to would coming strategic briefly plan

to providing a that the coming Importantly, we the to and to a to a share update of in firm turn which January This will business of Stephen ourselves and update we'll targets With through walk will hold once financial the work continue review for we our specific strategy. this will date results accountable include it I broader confirmed. over businesses. our strategic toward each

Stephen Scherr

Thanks David.

Let's numbers. run the through

Page on the begin of me Let presentation. X

environment the Against second clients our this quarter priorities. strategic we turned our out mentioned, executing to be mixed. to continue in the serve backdrop, David and on As focus on

through the numbers in run detail. Let's

$XXX Moving on quarter of first to net revenues X% million produce down and robust of X, year Investment Page a versus X% Financial Banking down versus year. were revenues $X.X Advisory the versus ago quarter. X% last billion,

sectors dialogues dormant approximately During financials, our in number billion number remain the and table contributing which participated rankings announced seeing billion momentum are including deal a been across year-to-date. of TMT, M&A league rather one closed $XXX and for we we transactions Client had to volume, $XXX healthcare quarter, of of healthy notably on and years.

revenues the versus a quarter million in quarter which held flat $XXX to roughly experienced last shutdown versus Moving and government improves Year-to-date, Pinterest one underwriting of net quarter. bringing We quarter to globally underwriting, Avantor, year. roles of supported ranked strong significantly during the equity number we Uber, the and over first this billion and the underwriting held $XX including markets equity transactions by across volume deal leadership Slack. public many XXX companies notable

a net Underwriting, Debt to from ago. down XX% were year million, $XXX Turning revenues

this from investment did finance included to not quarter leveraged second significant same year extent The repeat which quarter. of last the contributions a number grade activity, and

in high-yield strengths. related our franchise and year-to-date the the reflecting the Our market Nonetheless, deal table with with across materially with were our loan further league this activity quarter rank lower in industry, lower financings, our particularly which two rising flows volumes trends to sponsors. financial consistent competitive number well-positioned in spot remains reflected acquisition

a slightly given several And pipeline as and in quickly, strategic will the our while our the in in underwriting. portion backlog healthy equity can and active completion first of continued are change Our underwritings. both large Nonetheless, to the we monetized financing clients markets dialogue investment executing advisory of backlog banking quarters remain of markets. debt our decreased quarter of end optimistic need coming transactions increased client we through access levels the that sequentially versus

Client the activity Institutional net in strength solid to business both client billion in versus ago. FICC, quarter Services equities. lower quarter X% reflecting in versus as XX% Page our diversified billion were in mix low by opportunity down X, more set second revenues second in second last despite a client operating experienced down offset revenues were at Moving client year challenging $X.X year-over-year notable activity generally the net FICC the $X.X in proved Europe. execution on the year, Overall, and strength environment quarter, presented the

volumes activity Uncertainty currencies and rates trade client subdued including low engagement. cuts client Relative and the emerging the last Fed tariff to constrained we and of contributing Specifically, was during concerns businesses amid client as more macro sentiment volatility economic was anticipated data sentiment. drove in saw markets sentiment magnitude and by rate and more shifting quarter lower factor. than the a around our year, and timing also

finance the positive. and particularly lessened quarter, increased in a products, contributions volatility activity but was more and mortgage year inventory performance. micro XXXX cost solutions credit loans In in in automate threats backdrop businesses, both saw formats. down at heavily more direction historic of our resulting major credit a and experienced lower implied relative from structured to versus capital revenues In on and tariff I late electronically, activity workflows, issuance low previously, base contrast mentioned better environment In Results exposure investors the pairs and to investment efficient at more credit, as as and oil, monitor rates credit activity, grew realized activity were deliver The As by we levels businesses. debt I mortgages. saw results had and more quarter. in lows our the FX in power cautious very industrial notwithstanding a we client origination selection. muted leveraged Separately, came ago, stood structured serve investing particularly better year and among throughout our following our gas client solid are earlier. our saw have said apparent, a widening became Commodities our amidst discerning as in clients levels lower increase We year-over-year ago, spread activity closing while of and and grade performance currencies, the remain end the alongside improved in we our clients.

of in versus reflects share X. were and Net Equities a to success the sequentially on were stronger believe to second the $XXX strength up second billion, our cash year $X consolidation equities were market from dedication quarter X% versus up serving low Page to quarter services commissions execution by ago. suite quarter million, continuing both and increased revenues prime We and were the in and XX% and touch of relative fees XX% by both across Turning full year cash, up derivatives a for XX% hi and ago. clients first of aided client revenues and Results a a in channels. Net global XXXX. net our up revenues derivatives X% versus million aided $XXX performance sequentially EMEA. of touch

by continue improved. market Sequential We as touch also X% and net execution. rebound million and revenues trends client improvement to low of a average seasonal in rose grow sequentially was Security $XXX sentiment share driven services year-over-year. in XX% balances

by robust generated net driven portfolio contributing revenues on of and of the Collectively Investing specific $X.X to revenues the IPOs like billion $X.X Page and Lending of the revaluations. Moving performance quarter. I&L in billion, company activities corporates securities produced in second events X. net Equity in our

Second gains equities. reflecting XX% versus a primarily higher public ago, from up were year quarter results net

As on slide, net approximately corporate you XX% investments. of can the our revenues our from were estate XX% see and from real were

corporate a public went $XXX of results of the that million during of These the portfolio, gain included came IPO nearly approximately from the the Tradeweb. Within from investments performance half quarter.

time Tradeweb in for which method given at our was influence since Our under of investment equity we've the XXXX owned significant investment. the accounted the

of over investment. did As we a recognize P&L consequence, the not on revaluation Tradeweb time our

grew this the investments addition including of and attention we our Uber, your which trade would that web, size draw HeadHunter, In IPO holdings. several notional to other Avantor, to public notable quarter,

billion together, represent $X.X four investment approximately portfolio. public investments Taken of our XX% these

and Turning $XXX Securities were mark-to-market from Debt revenues income modest million, Page million to $XXX gains. net X, and Loans net included of interest

portfolio portfolio up note billion, loan we $X loan XX% driven was is our total Our total of growth secured. by billion sequentially, and loan $XX corporate

was down X%versus credit $XXX million, Our provision last quarter.

billion basis leading charged-off Private included the fees low and net driven in versus which produced by at Management, ratio quarter, global billion second X% wide approximately management remains of On were Investment and firm up asset we X Our management $X.X $X.X franchise. to XX Page of business points. revenues Wealth turning diversified other Net our revenues year. under last X% second timing supervision. we a fees Incentive and quarter to of contrast, first in and growth incentive year, outsize alternative variety versus of were last driven the realizations continued By up our million generated across reflecting the last fees quarter lower funds. relative of assets significantly the the in performance $XXX year by investment

lower transaction PWM activity. from We also revenues saw client trading

quarter up billion first at net Assets billion $XX long-term of under the billion of $XX the market liquidity trillion, and supervision a billion of record versus appreciation. by $XX inflows, $XX inflows driven finished $X.X quarter,

to on me expenses turn Page let XX. Now

expense and last Our the total increased technology for litigation operating $X.X of by versus consolidated were expenses of lower flat quarter lower and second year, and compensation billion expense, reflecting investments. offset benefits

year-over-year. $XX year-to-date, were X% billion, the total down For expenses

up by XX.X%, driven compensation year and revenues ago, lower ongoing offset by lower basis investments, was points efficiency ratio year-to-date partially XXX a expense. Our versus

Markus, our topic the businesses that of investment digital supporting expected be in substantial spoken past, the we on build investment spend, launch Apple roughly we million a On approximately from are billion has for Card more basis build spending total very Investment which the cost $XXX in organic we've of investments Year-to-date, drag second and will XXXX. of banking meaningful resulting reserve pretax embedded see in quarter making performance of Card in The of our later XX XXXX our cumulative continue XXXX was in platforms. new the transaction platform points cumulatively summer. new this the the through and also of depth growth and from the Apple to these the $X.X inception each A been initial following firm. loss cycle approximately will the when our ROE. into businesses pretax will is impact as

this over firm's to drag scale an businesses but the not coming reverse, years, ROE. contributor only accretive the these As become should

Next on taxes.

quarter. for rate the the XX% tax XX% the in reported quarter tax discrete Our for first benefits was including and year-to-date

to full XX%. approximately year to our our estimate XXXX to tax continue consistent expect with of We XX% medium-term rate be

is performance. philosophy ratio, reflection past, the ratio of our year-to-date and it driven ratio the a expectation for year our the margins On in steadfast and Also marginal for to of These will scale should firm. measure compensation relevant estimate less the was accrual below and XX%. at platform as and expenses scale become as as always proportion to be which on as that Reduction operating compensation grow for we we our compensation more efficiency the just total platform a noted a a will XX% firm, remains principles of the is higher in obtain best businesses for the businesses, full our cost the more compensation XXXX have contributor. as carry decline reliant

XX. capital to Turning on Page

tier XX.X% increased ratio advanced higher common versus ratio first Our basis by the approach. using under and the equity XX.X% each X driven earnings. XX the standardized is The approach retained was by points quarter

X.X dividends. the was quarter, billion stock $XXX million flat repurchases common sequentially. a SLR shareholders in and including returned In billion total we of of % to Our stock $X.X $X.XX

Our at XXX low share million count record shares. ended basic another of quarter the

value ago. Our versus up was $XXX, XX% a per share book year

up Federal than of of up Reserve David we capital did last to share to billion, cycle. $X CCAR higher As that including XXXX mentioned, capital return, are of to billion not $X.X our total XX% pleased the object plan repurchases

to increased returning flexibility earnings a the continue the capital opportunities to our enjoy over option accretive We context by environment of afforded portion shareholders position. are strategy, of our year. coming in strong the the significant with by consistent we While our for market business investment our long-held in and the assess capital of encouraged return we

the of let's reviewing our moment Reserve's completion on capital. philosophy stress annual Federal successful our spend test, Following a

to First our at unchanged. business access to attractive after view to the shareholders. first capital to it invest remains in on returns We these for opportunities we endeavor our long-term will allocation return have investments, look we extent

to dividends with having Second higher dividend respect a to term. buybacks, aspire we versus long

As it's dynamic share firm's us be and generate we an of flexibility business more the revenue. continue to of capital the more and said of to That recurring on allocations confidence important and component in sources reflective environment further ability allow return they opportunities. it's the our as total with predictable value repurchases shareholder to of based

on calculations stress differ test the its of which results. and would XX.X% Third in to rule capital ratio of X.X% regarding based neighborhood our we the compares the management buffer, form, our total stress XX.X%. in excluding of to which an on proposed CETX quarter final approximately This the based requirement XXXX may materially SCB XXXX XX%, imply a standardized buffers favorably estimate second

amount of capital we While the not on floor and we CCAR are at appropriate capacity a the well manage we firm capital view ceiling note pleased levels. the will the $X.X that position as to authorization a billion to return, should

Page Turning balance for and liquidity. to XX sheet

balance $XXX billion, quarter. last versus billion $XX Our was sheet up

to the billion including year. side since deposits last which deposits $XXX doubled more liability consumer On we increased than $XX have of over billion,

their bank funding. migrating quarter, the and lower-cost into During advantage take of further we businesses entities more saw to progress diversified our

demand. billion quarter, support which to Our global during averaged core note may assets decline we client opportunities as continue to have we liquid the $XXX

questions, brief closing a thoughts. taking Before few

should economic was despite growth environment, backdrop solid operating supportive quarter second as mixed remain of believe performance said, our business. the we David our the overall While

we efficiently can are thank on new in. three, our things diversifying returns into three we more all our for existing and objectives. executing If well, core business. for that long-term are shareholders. we businesses business serving adjacent in Two, questions. that, growing open will with dialing and these for do. As excellence clients confident now strong, our One, operating we you I the go and diligently we With up again we deliver our line forward, do

Operator

Schorr from ISI. Evercore Please line is your with of Glenn And question go Instructions] the ahead. [Operator first

GlennSchorr

thinking real Thanks that? the what I'm Maybe this update with Day, form Investor about call things you're update meaning on very strategic you providing quickie, coming like a slides mentioned start much. curious a to January.

DavidSolomon

morning. giving committed and the January. targets and in update Glenn thanks, strategic So good We're question. particular I appreciate to a in providing

fall and this specific the we we're also working we'll know format As date, it. exact towards communicate when the

GlennSchorr

like numbers well my of I the good as challenges some the I'm process are cool. like question as and consolidating sheet across third how about sure and harder I'm grow party there's will wonder at know curious all good third third just investment, between the together Okay, investments much but you managing that. I&L, this you've that funds always you there, balance businesses bit bring a I'm but you're conflicts balance through you In allocate that? sheet been be I party. as advisor, is long on if I And will even feel talk little could this going and party, versus on things

DavidSolomon

the It's spend appreciate something we Sure, obviously and thinking about. I question. a time of lot

over We about have look organized the multiple had when it because bringing firm. the we've of XX but of doing this businesses time internally spent years. been which them now been in thinking parts at you reorganizing and together for them We're lot these past a

are to are we're can consistently. of say have issues client I balance from we proven over time the time on We think the managers but of model, the focused that business capital. I and And of to come in that very period very, world. right significant We striking manage do out the and there third time amount of long this asset this party can alternative largest a one

should streamlining that and I by actually clear. the integrated things it the is organization easier process, this as think decision-making operation facing one an clients and process our the make of more you get

have we that long something period do to to And well will a we time. so, of over continue it's recognize

and to they help organizing our them, cetera will listening , We was I talking feel businesses our -- to together the bringing do are et clients us and and that. clients

Operator

of line Autonomous. Chris go ahead. Bolu Our from next comes the with question Please

ChrisBolu

Good David and morning Stephen.

the could but we looking aspirational how the should you like about in to more Or Are targets forward for that should take look we targets, more one two achieving the can meet timeframe years targets we to get getting five for January to? you your over on setting targets? to be next think targets years? Just long-term

Stephen Scherr

Thanks in focus will I said of play be and putting of making this in that will term. would meaningful we and prepared in the over equally the the out returns We're both and out targets as going on over over the those the say timeframe some course be the Christian. medium course term. our returns The that to depth that will efficiency I on of midst remarks the the is longer be the will investments to of business. medium year and into XXXX that in

like will terms Card, like take to transaction businesses. some profiles. two the have. along return will like platforms we now perhaps profiles will targets, plays in the investing out to Marcus, get. that the between to the we're and continue in be for, efficiency greater of is in Along this you banking. and to give returns investing them it of existing we the Those But that. in even of so will Apple And inside bring we what did you the projects to have call that and way, expect type spending precision and greater on we'll we're as what with as we're particular we of clarity spending the But out businesses but targets point we're direction what the then. should return travel of have medium-term Equally, Those

ChrisBolu

a know the what on the of business, the excited growth put tricking when you here, of maybe very this as you so size alternatives then we much. what's balance profile compete alternative Great. maybe help don't it how like all the of so you And do preview delicate right And that Thank more today. and then maybe strands clientele? of but against the to you asset one kind looks managers, if bring the I business you sort the like looks competing you size all issue Goldman together. doing were like for versus against could what key that we’re us together when just look see to

DavidSolomon

Sure.

across with real today broadly, credit, plan and classes currently. first, And we we the includes in respect estate. asset So that includes broad private growth operate four to to That private business also equity. equity, operate that

different XX time, classes. these assets provide our over the manage respect this, in are that more to on in this said we've so to channels, increase will over balance currently these we exist capital to all amount and time These very of which of aspirations transparency in are we asset for And you to third-party that the now. four to right question, significant the size With previous doing as businesses the and years. operating I been significant

We that the the at you make of businesses they look here alternative operate when have said collectively, publicly one asset top the five we us that managers in world today.

last fact the very that XX execute And does executed change very that long we way the time. very, a clients can significant period years of the have internally process reorganizing we've our it, And so so navigate very, not we're a in the we serve will we better over and same to for that on continue that business.

Stephen Scherr

I'll is point that David will your a other one out this to question points transition. respond rightly -- add other one The to be

not we reallocating anticipate different a revenue into of by we'll with maintain During Meaning, do shortfall sleeves. sheet balance that of balance these this transition the movement. sheet flexibility

sleeves sheet be As on there. real different the to balance will it's deployed worth example returns higher it's respect credit, David whether opportunity pointed that capital to also and noting realize carry density the different for with and equity out estate

of time. very well we're as aware David will here flow the a So transition and revenue that's maintaining over pointed be out this

Operator

the Michael ahead. go of line comes with question Bank America. next Carrier from Please Your of

MichaelCarrier

questions. the for Thanks morning. taking Good

the the a dividend one First capital so lot. just more for on capital, plus have receive approval buybacks ratios you improved

front, You're investing the on still business. the doing some in M&A

being the given alternative sustainable, this of repositioning business the So particularly is sheet. importantly FICC within like for Probably business. I balance are the do you everything meaning some if front on able guess just and color to that the looking on where

Stephen Scherr

Sure.

to direction our the what fair and a it's reflects opportunities making. as I and in Meaning to approved will our from that travel see accretive return. We're note capital not this said do generate demonstrates those out year capital of to the as you we to overall think of to in played matter clearly it, long-term invest are capital back It's we back of put that excess as what terms can want context and asked is And important and going think with to of circumstances to of CCAR we're I and where where And continue of to a what I was to we in an shareholder return continue in and return. go out are comfortable at terms scope general on market that posture So say that for we given we Away that changed. are. reflection in of of to investments put in we're stewards look to way commitment CCAR shareholders. to shareholders. capital the has going the the looking what in the what commentary, otherwise

has into started the since On capital particular, in came context efficiency borne focus and cost for the to not you been we the re-underwrite FICC, delivering question on FICC but and clients. equally raised quarter the look business of and about in of around our this

I clients focused intermediating of like. corporates, on-pricing a credit in of do in that so talent transaction and we to of the such and at calibrators efficiency. and and having which capital accomplishing focused we that platforms, this e-commodities is on the banking platforms focus core. franchise. in historical equally of is good look the the a grade it that expanding be investment to firm. out And When on right It's investment competency the for going Marquee, the continues you the be look business context and terms the as and particular, this development say equally the of continue ways When of do to at risk cost business in those and the core at greater is would the to FICC We're engine ours

MichaelCarrier

strategic this thanks just follow-up Okay, then and just question, a on review.

the of sort of focus lot a guys revenue just where opportunities there's think you are and I on focused.

term get the some initiatives to ratio, the improve over or are and in place, the given through base you ratio. are wanted efficiency run focus on lower the Just efficiency some the progress and investments the the making in just to update longer time cost of and that an of guys to and

Stephen Scherr

Sure.

answer is I the to built as whether components. being business, or transaction that of would of attached two is lower. card intended compensation that -- businesses, banking. built business meaning the So component I'll businesses it is a that's part to credit Those new are that scale consumer in is the kind business be One

such that margin have and operating marginal full the businesses cost You continues made scale to grow. investment in those is at

higher achieve initiatives. newer in. the the I that revenue you efficiency comes so number on a That's greater And describe would way

throughput efficiency securities it of which and cost-efficient ability more that where less to of we're a been us, travel. I in more it's compliance what and it's direction the way component just the equally standing broadly. introduction us The than of driven; the mentioned the it in places platform incumbent deployment they in of businesses including what we're is in technology the in higher second meet businesses, in examples a support human we've I'd doing These render true technology of FICC support doing that's can the businesses say carries should historically. to is to are to Federation like we to two also and more and efficient much doing in about order around want is the of capital, our to clients part with the what such few or price incumbent lowering I the the platforms we're trades, lowering business it's engage more where say point the businesses.

Operator

question next with the from Chubak Please The is go line Steven of ahead. Research. Wolfe

StevenChubak

Hey, good morning.

appreciate the the capital of buffer, reinforces your certainly So the capital color position. the strength on stress X.X%

thinking to additional will I'm about of Given your factors over buffer? how you're maybe the appropriate basis XXX philosophically quarters. that likely that calculus? create the next current that four management some are you're ratio points And what impact above are sizing just just capital XX to wondering the

Stephen Scherr

part in What SCB are which variability in of direction stress comes fluctuation there looks think where right that ruling inevitably I regulations way travel like; of calculus the CCAR the and these are. Well, imposed. equally is the the is in final results of

the itself. those So we will overall mindful very in maintain of a calculus abilities buffer that's sort of

direction that to of we earlier un-objected what is by had really and -- In and should in terms the was the it of laid general what Fed. it capital sort petitioned I take left think CCAR this you philosophically, of out is what is I results particular the in

to point got the like now board the for dividend, also As in jump of third but being also are put the a in confidence XX% investments revenues We've quite of confident reasonable increasing able out in is of firm. back. the of the durability that go. the we're being quarter And a lot approved and our which the the that made, on a our circumstances of is this capital terms reflection amount we'd direction to of plate by a dividend profile I'd under increase

StevenChubak

And Thank efficiency. me one for more for that Stephen. just on

the billion $X.X will efficiency reasonable we the peaked on to newer a to what's part XXXX, progress And implement some assess, of you the I expectation XXXX of changes early speak are investment of could given spend some in likely given there. margin? in XXXX. the platforms as the marginal to to noted early I on size the whether some of maybe in plan the you newer see initiatives as You initiatives, businesses investment expect was should hoping know that legacy maybe of tougher some but the you terms

Stephen Scherr

Yes.

revenue. So, of part is the look, efficiency of function one ratio in obviously

the So the us. front see of fortunes where take we'll

certain that businesses past, costs, small that to clients underpin example. I different in are what's transacting is done not in really expense with one will, what think looking we've platforms the new but and realized manner than form just term of introduced the base, incumbent meaning trading in be in happening that are quick there efficiencies sort cost near to our on On a flows the if for, we're you command,

investment If of pricing way can man-hours thousands at both business grade in and would order in play of you sides engine, a look right a the to risk have taken you look that we at trade bond compute. our then

had time value. in its terms You of have inefficiency would

a to look and can has basis cost able more we're platform conform what engage sufficient than provide where portfolio Now happened on client basis a develop efficient and in a the much to the past.

I and longer efficiency So of in the as that realized of you realizing context incumbent a the there's say There'll of sooner businesses. context I think newer we're initiatives to or be the should note in timeframe some efficiency sooner platforms be underpinning efficiency building.

Operator

question Morgan from next is Your ahead. Stanley. go Please Betsy wives line of of the with Graseck

BetsyGraseck

a details, based on that end again run we put some would And Applecart Hi, or portfolio. estimates question credit? good X% recently note on assumptions, markets morning. the can't you lot Applecart, somewhere two asked and A a about the expect a question on parts. One the upcoming how where And thinking I an consumer together about go ROA. you with it expectation around the you're I know running I is up you're to then of that through for in

you fee. lower than you it are question about higher that peers on again do the --the charging the there Or do and I than it a a you what thinking have how -- ROA? business more information but And lending? this lot that's Now question. for Is a that's business current your X% that peers, it's of missing? is on basically are wrong? think ROA, I business And of rates nut another quality should which a is out risky X% versus credit am is about be my inherently no assumptions generates based What consumer running at a I that's

Stephen Scherr

thank Sure, you.

I is business credit risk, delivered saying equally profile the take credit risk meaning context risk the cards, risk that is. matter consumer focus not no this a risk sort operational denying card and of whether it's digitally business, will So is financial where let that's that me risk the is traditional that different and than credit start building. business by our the a or we're just there's digital no say card what a would but of Marcus in on or

you around level that increasing it continues in the Markus growth make to part critical perform and and entirely would we say important And quite What's we're be say to on while to construct. look is a at to conscious And if Goldman growth return decisions the this risk-adjusted slowed me business, that's the also consumer speculate of the that set card business. in pace like belong that would for well, simply on on as It the Sachs and simply it. the so I I'd us way And the what credit we're for the Betsy through premature looks in on loan what's not of at risk bank. taking in sort of have that return on look of we looking up those. and we're those asset that's at a risk calibration increasing contemplation all growth this. grow elements. of on rate basis

so a dispersed. we in continue credit in risk So which on basis. as totality, different a is return out a to business it at grow both way it But it we'll is this we each its marginally risk-adjusted look and look in is at

BetsyGraseck

businesses efficiency the that I at scale, to be ratio FinTechs a expense run as reasonable you you're more really ratio legacy of bank with in build, on about in So competitors which other thinking that's somewhere look efficiency expected the businesses should scale at fact competitors? follow-up when of at intermediate or line Or to did these the between? to do expense think given should and you they're going XX% with I that new be at these a has that be running

Stephen Scherr

been now expectations our near be the it's nowhere yet for that basis, as a I would portfolio on we've say what that grown we would couple out. of grow and scale of beta while in months the it have

the me we be kind on And to and as speculate out. would to to that once premature start it to more build for efficiency. of We'll reflect this start launch once portfolio we so

the I the the to numbers and what my tell the back with efficiency will a so and equally both that sort end but and little you the be put the operationally we that, it's delivery have all intended in terms but be on that through both end Apple efficient I front is the is resilient, on premature be So the to of early. built should delivery intended What can reflected jointly application it. of around is app, say again in on expectation backend to is

Operator

Please ahead. go Your comes Mike line of Wells Securities. Fargo with the question from next Mayo

MichaelMayo

US, continue else where the outside you expansion as spend, consider? stand you might to to do Hi, on of what the markets countries investment additional relates it the and with

Stephen Scherr

that forecast bit the a about both goes not speculation in growing terms we in Obviously, market. sort Germany. So that have context has in the our of been expand of our as of Germany. country the next place if that. and depth expand outside of the continental generating. United been when would for the what speculating I on press understand speculation expectations quite would in it's sort where in I that Marcus too expand. Europe surprising States deposit opportunities But was first the There UK and capable be and there the early platform that plans context in on in the will deposit us to our think in the of which There's ahead really the we of been of of business of though market It's speculation a the it's there exceeded to Mike, has

plate we've States and the in around So a UK that. for in moment United lot got our to pursue the continue in terms execution on and the of the the we'll platform

MichaelMayo

resolve be take to new What's a unrelated SEC your saying it There's this? right of that? the What's easier the All status? sorts reserves of bit by matters? little the on Xrd might you then any question. that a and one on July head XMBD these did additional follow-up statement all take for

Stephen Scherr

one $XX you the it where legal incremental are. $X this I RPL that out was. the say will We to out number point that may recognize now give of relating $X.X this billion don't should million. are on one again in apply; So detail that on Q that from of we it's reserve possible to It the accounting regimes And important are as adjusting events estimate that I could reserves probable, to number play to would is our there billion we possible, quarter reserves, just in our Q be providing and RPL. the took that between elements RPL. of different that that alter thresholds published the what date. and best

so by happened I that's what financially. And can offer you of way what's

for otherwise In be make. me intend others I statements statements think of being inappropriate made, to they it of terms would speculate what sort by on

past, as in said a as think developments, further we've intend a with to we're more. bit cooperative way a position are the We stay that in in when and I engagement the and there to about be we'll authorities. talk that

Operator

go Kian the Morgan. from ahead. JP Abouhossein with questions line next of Please Your

KianAbouhossein

Hi. I two questions. have

And are on your heard PS related Also is some world. volume reporting that's Because far. Can a gain the on revenues quarter-on-quarter an your you're understanding you drivers clearly why but and clients both in coming on rates. And having you I nothing some now and clearly strong. Because of see more share bit last in to where you base? you and are differently outperforming this great order should expansion area, such impact those FX And were are? are coming can equity is you investments I so expansion in but and clearly more more the as and revenue from? understand doing gaps more to on to close we Transactions volatility FICC products? in when have be don't the terms terms movements -- you XX the two detail muted yet very equity want which to traditional where actually get The see feel one derivative first the you to appears and in would down rates months just sec? your what okayish, the give an if if area? the that from a products numbers in And shown this secondly of do business. liquid XX We've just client to market in bit and color investments just of year-over-year see you drivers of over And those base. back

DavidSolomon

share as benefits to of So low want pleased in touch will handful Steven on XX% of there's highlighted do intermediation capabilities, than business our start equity activity investments think really the in It capabilities. respect low from franchise. I'll compete last With say we would to across people low quarters, was FICC, that I bit and much on equities. and we've was FICC consolidating throughout and broadly. comment were our very presentation, of the stating little call the component we cash, the dynamics detail. highlight on touch think you market that of I investments franchise I--we we starting is some make market derivatives performance the our a and page this broadly against. performance continue the broadly, the X been I or or to more a intermediation, our with with been the benefit a some we've broad those was as give I The higher and market we're given to over of see benchmark in of touch I sense make

portion portion softer, and or less your NIM quarter, was environment given mix intermediation XX/XX to clearly it had we we continue a have your intermediation market which you volatility, this has but if market some think So is particularly little of the that's Stephen broadening products a client make just these some point to the more detail ask you investments and base, in out on bit I'd through. of provide how in as highlight we non

Stephen Scherr

Thanks David.

to just FICC direct pivot a to So be question. your to and

at progress the And and seeing to this come and which some into different you also that to corporate and out this owns as exist a set in we're base a typically, carry particular institutional builds think to the built to us corporate have will we're firm. around the is of inside rates expand look would early of say banking joint say products if more progress the point part that where What's if once effort have and and starting venture variety and a If some way on or benefit dividend. transaction say in where making than by client to broadening look out not I of initiatives will and obviously rates, the would those of carry FICC, the to that. see corporate bring FX entry more engaged. that in of franchise an corporates you cash clients quarter into we exclusively within FX more corporates between were the to the I management, an banking including FX Europe. to I'd penetrate further franchise, part that business at potential we captive ability didn't the demonstrably relationships, forward strong the through I we banking and bear

our you if in a a of prove aim just project think customer, on bring I XXXX. to that already will, platform that and particular could Sachs be and Goldman customers too benefit and own across on to clients is we

confident sort seeing And progress make of on no to business this, is there's confident running potential perform at unlocking this that very the yet we're early of which potential. so we're show. signs observation but you we have We're the can from in

the of direction out, time bit initiatives is doubt positive moving we're no a they of will one. a bear but new take Some little these before

Operator

question Brennan Hawken comes with UBS. ahead. go from line next Our of the Please

BrennanHawken

as How growth Thanks. we watch? then And benchmark rate? over few rates, the should upper NII you we environment us think XXX how rate day forward? versus I&L if the the portfolio, going a gents, you about for that on What a predominantly the years NIM, NIMs should been NII few either portion morning, of NII sensitivity could how you think strong Good the much question. past a how about quarter-over-quarter. help of Thanks XXX down or debt calculate are might bps taking guys. that Depending portfolio softening maybe impact growth has digits single the rate or there? seen in count have it's guys balanced

Stephen Scherr

for Sure. question. the Thanks

think of from mix best assets. we to In different the where to have way the that some commercial point both, is a the you if a composition to out liability differ, and different banks. we question I of our will, equally context bigger answer just

to funding liability there's the our portion On fixed floating. side, a that's that's of portion

will otherwise a the not it's I liability to correlated, speaking that's skew generally so will, in which our from And way growth to towards rates as move. deposits. think dynamically And starting you if mix benefit NII

perspective I the offer would the so And that's liability on side.

a asset to as and impact more assets which to the function what a the this. importantly to some we the the rate bigger in commercial a more velocity that or otherwise are higher might much a in of And equally are have of term assets banks has muted leads direction rates is On and that see the side, of moving. floating that based underlie too

BrennanHawken

on follow some Okay have to or NIM improvement down might balances is up? that how the much and break Is rate last versus then we've far year's? as as possible or to that seen part it

Stephen Scherr

this the I terms that itself. of that is scope I'd also the did of point and for give quite to by out size you with one which sort of has is I to the an context net you that served answer would now. think precise remarks XX% as lending of the is I secured income do up I with clients financing. we're that's generating in some in encourage more that that this balances the are the And interest would lending recognizing I strategic about can in say doing follow than of this

to greater you with onto you that offer provide I insight but so and particulars. the can Heather And team the

Operator

line Buckingham Your with questions go next Jim of Mitchell Research. Please the from ahead.

JimMitchell

Hey, discussion. quick just Maybe fixed-income good follow on a up morning. the

you your well more flow decline efficiency how capital or Just expanding ROE see it Do that Is to targets is it or derivatives can business the coming assumed it or sure understand and want from you of get else? ways? need whether as improvements of it's see make entirely component to those out there footprint comes other internal something capital the I some into from that level you business. in come

Stephen Scherr

Sure.

expense denominator underwriting take need an that we've at it's that of none the that So the we What's scrutinizing how offset revenue much focused we've numerator of to as the and want we define in been face. revenue ROE the and establish we coming to do focus important as capital business capture in? the denominator way is the meaning the mind we the on re what revenue nobody the to can been both that What's lose that calculation, contains. in, it is looking And i.e. we're of how numerator in context tangible that is the that efficiency to market to calculus? ignore the

that scope expansive talked in wholesale a have business. really which business, re-underwriting revenue be market revenue focused net of of otherwise corporates addressable but the historically. a it this addition to we're assured have looking driven the ambition both expense in we which So about of and more at the by and looking context are is of to as include being to capital at we've the on these way in an the in Both largely

JimMitchell

out you case? that did risk pivot in revenue you pull do denominator that's it, there's as that all to a the you feel any capital kind at worry And of capital lower not or really or

Stephen Scherr

listen, I mean, of a okay. never this No. is calculus, kind linear

with decide we meaning the it a for not that has business. knock-on FICC credit implications. us or implications FICC in to sit Take four-walled, businesses outside it anything has themselves example securities the respect business and is is business for are knock-on do commodities, we around So for do whatever to

pulled. the on of thread adjacency our the businesses all gets So of

I've more would numerator to in other thing need meaning what about I addition publicly capital. in which is one take effort of thinking down, to The sort our So do of that example that before treasury and our funding we both an the to run the we're both how and working in the How retail is mindful liquidity funding, about around to cost lower-cost of point Embedded optimize stock talked our of is these has bring efficient, of funds liquidity identifying competitive. to in businesses of amount order render managed that, is terms been hard of deposits with? addition an out, do denominator. own but we the we numerator equally in more team sources

Operator

from a Your question Devin next JMP of Securities. comes Ryan ahead. line with Please go

DevinRyan

David Stephen. morning, Good and Great.

just it a into big First as question to enough just on affluent appetite to especially what the the broadly really M&A? the get more business guess in you're does and be you financial thinking look bigger United on there footprint to Capital expand whether United more with business connects the Capital do perspective deal closing, I opportunity. Ayco? the a you're to advisors mass maybe adding achieve is segments about with Ayco a give just little with or looking it Or how

DavidSolomon

is Capital RIAs to Sure. I really think the it's We're we on were we acquisition question. and XX Capital can interesting we But came fragmented the United a that so to is and that wealth sale, $X because from affluent a business, do this a what that thought accelerate This mass a have it opportunity if appreciate very assets wealth the brings that's offices billion at growth very very and of was we can terms came closing extended management make the it which excited with year segments really in between million $X XXX management up in affluent very, continue. fit this platform wealth, grow And continue asset to to very, actually, of category from. build our another the good And Ayco. looked products, we doing have the through we we'll good infrastructure, for But our channel have assets something something, $XX We we'll with the we what all management and good it further all to targeted The can base States. consider investable it, of a business, asset believe this that terms this have. was I was today, it us this call to we continue still United Ayco very in have progress for under channel. accelerates up sought we in our United now management you around we after business. management million not ability transaction think we accelerate through our not it. the particular running was obviously it, we're a we that big to And really day. of mass fee of acquisition

decided we on so to act it. And

DevinRyan

on trajectory alternative thinking fundraising. the just Any And be think Got or expectations about just as modeling about up thanks. think we're could just how party it, of very sort about we a third follow that cadence to whether be helpful, should it? it then of capital

DavidSolomon

the I Devin. will we know that see on appreciate I provide to a went transparency we that question, out. model it. time, lot anxious plan Over you're Yes. all more how

those we is go-forward first process and be think as across a the As basis. task them time. to of over develop And as plans a with them transparent you that on we business expectation and thing you what put communicative put plans would together will lot And the businesses we you forward are people to more in have you firm we have that expect, when together. of come can those do you we the

Operator

the is line Cassidy ahead. question next go RBC. of Your Gerard from with Please

GerardCassidy

And your Good mentioned today? think market sponsors. it the morning. loan quarter? volumes outlook those which with financial debt of the more financial the you. will the any What deal them sponsors? consistent Thank activity was doing from the the the In half seeing comments in do you flows the for the quarter across the activity in from what sponsors Can industry, financial us reflected you year area. you underwriting with are lower deal on stop And share you second and specifically cited were material with in M&A trends

DavidSolomon

the the environment still of so I we of equity in will have time increased reserve. private seen in question half at markets inflated I don't see it. more And will enormous the for great more private a run we has growth think the the the secular versus I how they assets, I bit cycle more you a -- in now first a steady, as the particular have have which of year evolves, impact I equity said macro surprising we've in it I more this that of have there about think it's arsenal not you certainly been moved be to has you investors a not high continued financing the we there if muted. what equity where done little to difference. policy far that think what specifically probably the no this it's an a monetary unspent competitive, level, been and it's think periods some it's That at the at first cycle and about year. regulatory accommodative have about that there's and think has capital of the Well, a guess has overlay, cycle been succeed. mean in order think look, environment the business also when think explanation tougher SNIP high-end of has overlay, this activity pay regulatory muted. this and environment you big over terms activity half is and the brought is continues muting activity

GerardCassidy

follow-up on quarter to you to a stand a clients it the bring and slide And Very what sheet where your you $XX us then using balance good and those of mentioned those quarter-to-quarter sheet. a in a balance there year the that us and customers client compared increase with your sheet? second share look or billion use then how balance reflecting course you when the assets as percentage of total demand revenues assets was at Can of give that as allocation. the And your is to is those XX you total ago? loans percentage you about

DavidSolomon

So to as a of reflection always the and fluctuation our to is clients. our balance ability the of respond in the interest opportunities sheet

decompose manner It's is in client. businesses our -what sheets and all fluctuation in of Truth, across know balance not all client what's form we hard the balance to activity a of the some to right, related client sheet so is client is what function And service. it, firm. all or of say not, to

of I size that's view so way and sheet both really growth balance the to And its would terms the composition. in

Operator

KBW. ahead. Brian the question from next Your Kleinhanzl of Please with comes go line

BrianKleinhanzl

thanks. Yes,

Just one quick question.

you saw there towards kind we On can with you Should walk up of that your the and -- to looking rate that just size of what the futures. market quarter, the Funds we came the down came behavior rate rate at Fed pay the been kind end more lower what's depositor decision through cuts of the expect -- how just

Stephen Scherr

Sure.

an the done. attention time adjustment and a to outflows we no it the rendering it made context to. We the to reduce the our around light retail We did we business. adverse the reduced or the began at deposit competitive call noting was our first to We reaction we what we competitive set since others of material movement, others in also made pronounced had saw ourselves the no rate nothing saw downward. well. worth decision So of in really as rate in It's

in of of End in Q&A way will where our down ourselves I movement set both flexible we think you in assume and rate that fluid and agile be relative the competitive to And or US platform comport that up should and is. UK. the will sort

Operator

questions. there Please remarks. At continue with no closing are further this any time,

Stephen Scherr

Okay. the on Since there would our I Otherwise to please meantime, enjoy October. look in joining arise And are months. of questions, speaking the call senior additional with for the no to more take day. your in don't in team. thank to many of to moment of to We If hope see coming rest like we you you to questions any the a behalf forward out everyone management Heather. hesitate reach

Operator

the Earnings and Goldman Ladies Quarter you conclude this does Thank for Sachs your Call. Conference gentlemen, XXXX participation. Second

disconnect. now may You

Heather Miner	Head of Investor Relations
David Solomon	Chairman and Chief Executive Officer
Stephen Scherr	Executive Vice President and Chief Financial Officer
Glenn Schorr	Evercore ISI
Chris Bolu	Autonomous
Michael Carrier	Bank of America
Steven Chubak	Wolfe Research
Betsy Graseck	Morgan Stanley
Michael Mayo	Wells Fargo Securities
Kian Abouhossein	JP Morgan
Brennan Hawken	UBS
Jim Mitchell	Buckingham Research
Devin Ryan	JMP Securities
Gerard Cassidy	RBC
Brian Kleinhanzl	KBW

The Goldman Sachs Group, Inc. (GS) 16 Jul 192019 Q2 Earnings call transcript