Goldman Sachs Group Inc (GS) — Q1 2023 Earnings Call Transcript

Good morning. This is Carey Halio, Head of Investor Relations and Chief Strategy Officer, Goldman Sachs. Welcome to our first quarter earnings conference call. Today we will reference our earnings presentation, which can be found on the Investor Relations page of our website at www.gs.com. Note information on forward-looking statements and non-GAAP measures appear on the earnings release and presentation. This audiocast is copyrighted material of The Goldman Sachs Group Inc. and may not be duplicated, reproduced, or rebroadcast without our consent. I am joined today by our Chairman and Chief Executive Officer, David Solomon, and our Chief Financial Officer, Denis Coleman. Let me pass the call to David.

Thanks, Carey, and good morning, everyone. Thank you for joining us. In the first quarter, we delivered solid performance in a challenging environment. We produced net revenues of $12.2 billion and generated earnings per share of $8.79 and an ROE of 11.6% and an ROTE of 12.6%. The first quarter was certainly volatile, particularly for the banking sector. After a fairly benign operating environment at the start of the year, in March, we witnessed the collapse of two regional banks in the United States. Stress quickly spread to a number of institutions across the financial sector where we saw ratings downgrades and steep valuation declines in very short order. These stresses were not limited to the U.S., as we saw when regulators helped arrange the combination of Switzerland's two largest financial institutions. It's important to appreciate the size of the disruption. Some of the market moves during the period were staggering, particularly in interest rates. To give you a sense of the magnitude, there have been just four days in the past 25 years that have seen two-year yields move by 50 basis points or more intraday. One was in September 2008 and three of them occurred in mid-March this year. Monday, March 13th was the biggest one-day move in the U.S. Treasury two-year yield in over 35 years. As we sit here today, it appears that the worst of the volatility is behind us. Prompt action by regulators was vital in bolstering confidence and stabilizing market sentiment. The events of the first quarter acted as another real-life stress test and demonstrated the resilience of the country's largest financial institutions. The G-SIBs have been a source of strength for the financial system. We joined a consortium with 10 other large institutions in making a $30 billion uninsured term deposit into First Republic Bank to send a strong vote of confidence in and commitment to the U.S. banking sector. As for Goldman Sachs, our long-standing and deeply rooted risk management culture helped us navigate this unusual environment. In our 154-year history, we have lived and managed through many periods of disruption, and our rigorous processes and planning for tailored scenarios before the stress enable us to react quickly and effectively when they do occur. While it's impossible to predict the exact form a market stress will take and we won't always execute perfectly, our risk management culture, strong liquidity, and robust capital position have allowed us to navigate a complex environment while also continuing to actively support our clients. Given this backdrop, it was clear our clients needed help managing their risks and turned to us for our expertise and execution capabilities. Both FICC and Equities had a strong quarter, as we helped clients with their intermediation and financing needs. Underwriting activity, however, remained extremely muted and below recent averages as capital markets were further delayed from reopening in a meaningful way given the market disruption. All-in, Global Banking & Markets delivered industry-leading returns of 16.6%, in line with our through-the-cycle targets even while advisory and capital markets activity remained muted. This franchise continues to show impressive resilience in a variety of market environments, given our broad and diversified set of businesses. Management fees across Asset & Wealth Management grew sequentially, but segment returns were in the mid-single-digits as our on-balance sheet investments remained susceptible to volatility in asset prices. It is a strategic priority to continue to reduce these positions. And while we've made progress, there is still work to do. In Platform Solutions, we saw positive underlying trends this quarter with revenues greater than provisions and we remain focused on driving this business towards profitability. We also continue to explore strategic alternatives within our consumer platform businesses. In the first quarter, we sold a portion of our Marcus loan portfolio and transferred the remainder to held-for-sale. While this activity is now reflected in our AWM segment, it is an example of our narrowing our focus in the consumer space. Denis will take you through the financial impact of that momentarily. Additionally, we are now initiating the process to explore the sale of GreenSky. We believe GreenSky is a good business and is performing well with first quarter originations in our core home improvement loans up over 25% year-over-year and a weighted FICO on total originations of over 780. Given our current strategic priorities, however, we may not be the best long-term holder of this business. We will update you on our progress if and when there are material developments. As I close, I'd like to say a few words about the forward outlook. The recent events in the banking sector are lowering growth expectations and there is a higher risk of a credit contraction given the environment is limiting banks' appetites to extend credit. This is an acceleration of a trend and a situation we're watching closely. Businesses and consumers continue to adjust to higher interest rates. While the forward trajectory is still unclear, we continue to be cautious about the economic outlook and we are operating the firm such that we are well prepared in the event that the environment weakens further. Overall, I feel very confident about the state of our client franchise and the long-term opportunity set for Goldman Sachs. As the events of the past quarter have illustrated, we are operating from a position of strength and we have the people in place around the world to continue serving the broad range of clients' needs with excellence. And while much has transpired since we held our Investor Day at the end of February, we remain focused on our strategy to strengthen our leading Global Banking & Markets franchise and grow our Asset & Wealth Management business, and we are committed to delivering for clients and shareholders. I will now turn it over to Denis to cover our financial results for the quarter in more detail.

Thank you, David. Good morning. Let's start with our results on page one of the presentation. In the first quarter, we generated net revenues of $12.2 billion and net earnings of $3.2 billion, resulting in earnings per share of $8.79. Turning to performance by segment, starting on Page 3. Global Banking & Markets produced revenues of $8.4 billion in the first quarter, which generated an industry-leading ROE for the segment of 16.6%. Advisory revenues of $818 million were down 27% amid lower industry completions. Underwriting revenues continued to be below recent averages and were lower year-over-year. Despite the difficult backdrop, we were number one in the league tables for completed M&A and high-yield debt underwriting. We also ranked second for equity and equity-related underwriting. Our backlog fell quarter-on-quarter, primarily in Advisory, but we remain cautiously optimistic on the outlook for the second half of the year and 2024, particularly for strategic M&A. We also expect investors will need more certainty before financing markets reopen broadly, but we have seen an increase in underwriting discussions in the first two weeks of the second quarter. FICC net revenues were $3.9 billion in the quarter, down 17%, as one of our strongest sets of results in rates was more than offset by significantly lower currencies and commodities revenues, which were very strong in the first quarter of 2022. In FICC financing, revenues rose slightly year-over-year. Equities net revenues were $3 billion in the quarter, down 7% year-on-year. A decline in intermediation revenues was partially offset by record financing revenues of $1.3 billion with the sequential increase driven by higher activity and increased balances coupled with improved customer spreads. Moving to Asset & Wealth Management on Page 5. Revenues of $3.2 billion rose 24% year-over-year, given improved results in equity and debt investments, and as management and other fees increased 12% year-over-year to a record $2.3 billion. Though underlying trends in the business remained strong, private banking and lending revenues of $354 million fell year-over-year, driven by the partial sale of our Marcus unsecured loan portfolio as well as a transfer of the remaining portfolio to held-for-sale, in line with our strategic decision to narrow our consumer ambitions. The associated revenue reduction of $470 million was largely offset by a reserve release of $440 million. Additionally, we benefited from NII and incremental reserve releases associated with paydowns. All-in, the Marcus loan portfolio was profitable for the quarter. Net revenues for equity investments were $119 million, driven by $229 million in revenues related to CIEs and $85 million of gains related to our $2 billion public portfolio, partially offset by $195 million of net losses on our $12 billion private equity portfolio, primarily within real estate. This quarter, we experienced approximately $355 million of impairments on our CIE portfolio, which are reflected in operating expenses. Debt investments revenues were $408 million, driven by net interest income of $363 million. Moving on to Page 6, total firmwide assets under supervision ended the quarter at a record $2.7 trillion, driven by $68 billion of market appreciation as well as $8 billion of long-term net inflows, representing our 21st consecutive quarter of long-term fee-based inflows. We also saw a meaningful strength in liquidity products with $49 billion of net inflows from new and existing clients amid the industry-wide flows in the money market funds. Turning to Page 7 on alternatives. Alternative assets under supervision totaled $268 billion at the end of the first quarter, driving $494 million in management and other fees for the quarter. Gross third-party fundraising was $14 billion, relatively solid given the current environment, and bringing total third-party fundraising since our 2020 Investor Day to $193 billion. While we expect the pace of fundraising to slow for the rest of 2023, we continue to feel good about the path forward and remain confident in achieving our 2024 target of $225 billion. On balance sheet alternative investments totaled approximately $57 billion, of which $27 billion was related to our historical principal investment portfolio. Despite the challenging environment, we reduced these on-balance sheet historical investments by $2.3 billion in the quarter. We are committed to our strategy to reduce balance sheet density, including reducing historical principal investment portfolio to less than $15 billion by 2024 year-end. I'll now turn to Platform Solutions on Page 8. Revenues of $564 million more than doubled year-over-year, driven by growth in loan balances in consumer platforms. This week, we announced the launch of a savings account for Apple Card users. We are excited to deepen our partnership with Apple through this additional offering and to introduce another source of deposit funding for the firm. In transaction banking, deposit balances ended the quarter slightly higher versus year-end, while revenues of $74 million were modestly lower quarter-over-quarter amid higher deposit costs. As we spoke about at our Investor Day in February, we're focused on further scaling this business with new clients and deepening our relationships with existing clients as we aspire to become their primary service provider. In this regard, we continue to see positive momentum on the platform as our client count grew by approximately 20% in the first quarter. On Page 9, firmwide net interest income of $1.8 billion in the first quarter was down 14% relative to the fourth quarter, driven by increased funding costs supporting trading activities within Global Banking & Markets. Our total loan portfolio at quarter end was $178 billion, essentially unchanged versus the fourth quarter. Provision for credit losses reflected a net benefit of $171 million, including the previously mentioned reserve release associated with the Marcus unsecured lending portfolio and model updates, which were only partially offset by roughly $245 million in consumer net charge-offs. Spending a moment on our commercial real estate lending portfolio, as of quarter-end, we had $29 billion of funded CRE loans. This portfolio is diversified by property type and includes $10 billion of exposure in the form of conservatively structured warehouse lending with typical LTVs of approximately 50%. Turning to expenses on Page 10. Total quarterly operating expenses were $8.4 billion. Our compensation ratio for the quarter net of provisions was 33%. Quarterly non-compensation expenses were $4.3 billion, essentially unchanged versus the fourth quarter, but up versus last year. The majority of the year-over-year increase was driven by the aforementioned CIE impairments as well as expenses related to NNIP. Our effective tax rate for the quarter was 19%. For the full year, we expect a tax rate between 21% and 22%. Turning to capital on Slide 11. Our common equity Tier 1 ratio was 14.8% at the end of the first quarter under the standardized approach, 100 basis points above our current requirement and at the top end of our management buffer. In the quarter, we returned $3.4 billion to shareholders, including common stock repurchases of over $2.5 billion and common stock dividends of roughly $870 million. While we expect to continue to focus on sustainably growing our dividend, we would note that repurchases in any given quarter will vary. Though we find our stock price attractive at current levels in light of the current environment, we expect to moderate our repurchase levels in the second quarter relative to the first quarter. In conclusion, our first quarter results were solid in the context of a volatile environment. Our robust financial position allowed us to focus on serving our clients and helping them navigate this period of market disruption. Across our leading businesses in Global Banking & Markets and Asset & Wealth Management, we remain well positioned to continue to support our clients and execute on our strategic priorities. With that, we'll now open up the line for questions.

Hi there. I'm interested in your optimism regarding M&A in the second half of the year, especially on the strategic side. Can you share what insights or developments have led to that confidence? It seems like there are likely conversations taking place. Additionally, how are things looking with the sponsor community? Thank you.

Yes, thank you, Glenn, for your question. You're correct that it relates to discussions and observations we can make. As we entered the new year, it's clear that discussions have increased. Confidence does play a significant role in how actively people engage in the M&A market, and recent developments over the past four weeks have somewhat slowed these discussions. However, in terms of major strategic activity, many large companies continue to strive for scale and competitive strength to further their strategies, and those strategic discussions remain quite active. In the last week or two, we’ve seen several deals announced that underscore this trend, and we are encouraged by the prospect of more similar developments. Companies need to keep executing to enhance their strategic positions. Regarding financial sponsors, we are still experiencing a reset. I find it promising that there were a couple of deals this quarter where the difference between what a financial sponsor could potentially achieve and the financing price aligned. That was a positive development and involved the sale of an older deal in the market. Nonetheless, financial sponsor activity remains subdued, and there is potential for improvement as the adjustments in value and financing costs progress. I anticipate more activity in the second half of the year unless there is a significant economic disruption, as it simply takes time for stakeholders to realign. We have gone through about five quarters of reset, and typically these situations start to recover after four to six quarters. Thus, I expect a more consistent level of activity following what has been a very quiet period.

I appreciate that. Building on your comment about companies wanting to strengthen their strategic positions, could we discuss your transaction banking platform, which is still experiencing growth? I'm interested in how the events of March influenced your approach to transaction banking and managing deposits. Did you observe any significant changes in deposit behavior during the March crisis? Thank you.

Glenn, it's Denis. Thanks for the question. I'd say that our conviction around the transaction banking business remains very, very strong. I think what we were able to observe in the first quarter, I highlighted in my script, and it's something that we're focused on strategically, is we grew the client count by about 20% in the quarter, which is a similar amount to all of last year. We're very focused on continuing to improve our position with our clients, offering them more and more services and growing this business steadily over the long term to create value. I think in terms of how the deposits themselves performed over the course of the quarter, they were in line with our expectations, and as we indicated, they ended on a quarter-over-quarter basis up just about $1 billion.

Hi, good morning. I guess two questions. One, David, you referred to the hyper volatility in the rates market, but would appreciate if you can address just fixed-income trading, what happened there this quarter. Clearly there was some lagged performance versus peers. To the extent you can, just give us a flavor of what happened and your expectations around how things evolve from here, how are clients' macro funds holding up in light of this volatility.

Yes, I appreciate the question. It's been interesting to observe that we had a very solid quarter in FICC, nearly reaching $4 billion. To put that in perspective, that's among the top ten quarters recorded, and specifically, it's the eighth best out of 96 quarters. This performance stands out, especially with the $4 billion headline figure. Throughout the quarter, there was volatility in client activity, and I believe we were well-positioned to serve our clients effectively. However, it’s important to note that our FICC business was down 17% compared to the first quarter of last year. Last year, we saw significant outperformance, with FICC revenues up by 21% year-over-year while competitors were mostly flat or down. This was largely due to our commodities business and the breadth of that area. The first quarter of 2022 was particularly notable because it coincided with the onset of the war in Ukraine, which led to increased volatility and client activity in commodities, resulting in an exceptionally strong quarter. Overall, the FICC performance this quarter was strong, and we were there to support our clients. Given the current environment, I expect continued activity from our clients amidst this uncertain period with noticeable movement and positioning.

Got it. Thanks for that. And then just separately, I guess, a big focus post Investor Day was picking up pace on asset sales. How does the environment over the last month influence that? Equity markets obviously held up pretty well ex the financials. So given the sense of just asset sale pace of that, how you're thinking about that and any change today versus Investor Day and how does that translate into pace of buybacks maybe in the back half of the year?

Yes. So we commented in the script about the fact that we made more progress on the disposition of our historical principal investments, and we highlighted that we reduced them from just under $30 billion to just over $27 billion during the quarter. Then it's also highlighted in the script that we feel on track to get to the $15 billion target number that we laid out over the course of the next 24 months. We feel good about that progress and we're going to continue to move to reduce that to zero over time. There are a lot of positions. There's no question when there are market headwinds, some of that might go a little bit slower, but we're on pace with what we're trying to do and are committed to it. Obviously, we see a big change in that business as we grow management fees and take the legacy investments out; the volatility in that business, we believe, will change meaningfully.

Good morning, David and Denis. Just to follow up on the question on the Markets business, March did feel like a very tough month for some of your institutional clients, particularly saw hedge fund closures; we are hearing of deleveraging. So how does that inform your view of the outlook for the trading businesses and your market share, particularly given, I guess, Goldman's exposure to the hedge fund community?

I appreciate that question. We're obviously very focused on share and our share gains. We do participate with the hedge fund community, but when you look at our big competitors, they participate very actively with the hedge fund community too. We also are very significant with the broad institutional community. As I said just in the previous question, our clients are active at the moment because there's a lot going on. We're very focused on our market share. As we said in our Investor Day, we laid out more metrics and more of a focus on continuing to look at where we can advance our position with the top 100 clients that we deal with in our markets business. We continue to be optimistic about our share position, our overall ability to serve our clients, and we do think in this environment, clients will continue to be active.

Great. Thank you. And then maybe a question on capital return. Can you just clarify why you are slowing buybacks? Your capital ratio is seen very healthy to your point that the stock is attractive at this level. So not sure that I get it. And then any comments on your appetite for strategic acquisitions here? There's been a lot of stress in the wealth management space, which is a space I know you guys are interested in. So curious here, if you're conserving capital to go on the offense.

Sure. Christian, it's Denis. Thank you for the question around capital. And obviously, in this case, appreciating the starting point in Q1, where we significantly increased the amount of buyback activity in Q1. We remain very committed to return of capital to shareholders, committed to sustainably growing our dividend, committing to the overall capital return profile, but we're also observing opportunities to deploy into the franchise on behalf of clients. There are elements of uncertainty in the overall macroeconomic environment. Our expectation is that buyback activity will be moderated, but we'll monitor that over the course of the quarter. As you say, we do like the stock price and remain committed to returning capital to shareholders.

Hi, good morning.

Good morning.

So I wanted to start off with a question on Platform Solutions. The business saw a step up in expense. I just wanted to understand how we should be thinking about the trajectory for expenses in the segment. And similarly, for provision going forward, just following this quarter's significant reserve release, we know you had accrued reserves pretty conservatively for that segment, but the top line momentum's good. It would just be helpful to get some perspective on how we should think about both the expense as well as the credit trajectory from here.

Sure. Thanks. In terms of the overall trajectory for the segment, I think we have to step back. Our number one focus is driving towards profitability. We also mentioned that we look to continue to improve the efficiency ratio. That's certainly over the course of a period of time. Maybe not every given quarter, but we remain committed to what we outlined. As you say, we've seen good top line performance of the business. And on the reserve release, it was a function of owning our point-of-sale business for some period of time, being able to observe it, and take in more data. GreenSky is actually performing better than we had modeled, and so that was a contributor to the reserve release in the segment. As we think about it on a go-forward basis, it's obviously going to be a function of origination activities across the platform. We now have a reserve level of roughly 13% in the consumer space. So that can give you a sense of how to model provisions based on forward origination activity.

That's great, Denis. And just for my follow-up on expense and maybe more like a ticky-tack modeling question, the expenses were a bit higher than expectations, but I recall you noted at Investor Day the need to absorb some severance charges. You also had some pretty outsized impairments related to CIE portfolio. Was hoping you can maybe help us quantify the level of one-timers in the expense base this quarter just as we think about benchmarking versus some of your longer-term efficiency targets.

Thank you very much. Let me break that down. Regarding compensation expenses, any charges related to severance and some actions taken in the first quarter are included in our overall compensation accrual, which is 30% to 33% of our revenues net of provisions. That's part of that figure. As for non-compensation expenses, they remained flat from the previous quarter but included $355 million in CIE impairments. We felt it was important to highlight that. It also accounts for a significant portion of the year-over-year difference between Q1 '22 and Q1 '23. Together with the full impact of NNIP for the quarter, this helps clarify the changes in that line for the first quarter of this year.

Hi, good morning.

Good morning.

So just a couple of quick questions here. One, on the consumer repositioning that you talked about today with the Marcus loan sales and with your comments around GreenSky, would you say that as those are done and dusted, that would be it for the consumer repositioning?

I believe we are clearly narrowing our focus. We remain committed to our deposit platform and our credit card platform. I see potential for us to engage in other strategic initiatives as we consider our operations. However, we will keep reviewing all possible avenues to ensure our success. As I mentioned, we don't believe we are the best owners of GreenSky, so we are taking steps regarding that, and we will continue working towards achieving profitability for our consumer and card platforms.

And so there's some nice capital release that comes from that. How should we anticipate you're going to be utilizing that as we look forward here?

So as we see the capital release from some of those activities, that just gives us incremental flexibility with respect to how we ultimately deploy that either back in the franchise and/or returning that capital back to shareholders.

Hi, just a little bit more on the consumer repositioning strategy. How much in the Marcus loans, I think there were $4.5 billion at year-end, did you sell? And what do you intend to do with the rest?

So we sold about $1 billion of the Marcus loans and the balance has been moved to held-for-sale, and so we'll be looking at moving down that position over time.

How much of the marks you took on these loans was included in the $4.5 billion? Was it just a portion or was it the whole portfolio?

We sold part of the portfolio and adjusted the remaining balance to current market values, which is reflected in the $470 million in net revenues. Our reserve release was $440 million. Overall for the quarter, we saw an increase in net interest income and other net paydowns. In total, we generated over $150 million in revenues, resulting in a profitable quarter. Looking ahead to the second quarter, we will keep generating net interest income from that portfolio and gradually reduce those exposures.

Good morning. Thanks for taking my questions. I'd like to follow up first on a question that Glenn asked about the transactional banking. In the past, in conversations, I believe that you've indicated that a lot of the competitors are the regional banks there. So I want to confirm that that's the case. And then given some of the stress that we've seen and concerns around some of those providers, how are you adjusting your strategy to continue to build on the momentum that you seem to have shown here in the first quarter? And if we see that continued stress, would you pursue inorganic avenues to add scale or capabilities?

Yes. So appreciate the question, Brennan. We think in transaction banking, we have a very good platform, a very good product. The feedback that we're getting from clients about the product offering, how it works, what it allows corporate treasuries and CFOs to do is very positive. It's obviously attractive for us to take deposits, but we want deposits that are stickier and are here because people are operating on our platform. And so we're working hard to make sure, as we're adding clients, we're bringing the value that attaches to the technology to what they're doing to grow that platform. We are seeing positive results, but this takes time. These are long-cycle decisions. They're not day-to-day decisions on short-term trades. As Denis highlighted, we had good momentum in terms of customer count where people added themselves to our platform. We're going to continue to focus on that, and we expect the business to grow over time.

Great. Thanks for that color. Appreciate it. And then for my follow-up, you all just announced this morning the new deposit arrangement with Apple. And the yield on that is pretty close to Marcus, a little above. How should we think about the economics of that Apple relationship and the deposits specifically? And then how do you manage potential risk for cannibalization with your own Marcus offering? Thanks.

So thank you for the question. Obviously, this is something that we launched yesterday that gives us another deposit channel. It's the opportunity for somebody that's a credit cardholder to put a deposit on. We've looked very closely at the overlap between who holds credit cards and who has a Marcus deposit, and that overlap is small, but we'll watch closely to see whether or not there is any cannibalization. But this is a way for us to try to open up another deposit channel, and it's always good for us to broaden our deposit base. This is small at the moment, and we'll watch it carefully, but I think it's an interesting opportunity for the firm.

Great. Good morning, David, Denis. I want to just touch on the equity financing strength in the quarter. I know you kind of highlighted spreads and customer activity, but also appreciate this is an area of focus for the firm bigger picture. So just love to think about kind of where we're jumping off of into the second quarter and whether the first quarter benefited from the market stress and that maybe you do syncretic things that happened during the quarter or if this is actually a reasonable kind of jumping off point and just maybe a better outlook for that business for the rest of the year.

Sure. I appreciate that question. I'll give you some context to help you understand sort of the sequential activity and the direction. Our overall balances were a lot lower into the end of last year based on overall market levels and also as we reduced our footprint. As we came into the first quarter, we were able to re-expand the capacity; clients engaged with us. We saw an increase in balances, increase in client activities, increase in customer spreads. We've had in place for some time a strategy to identify new types of clients that could come onto the platform and engage with us. I'd say that we're working sort of full speed ahead on that. We continue to be very, very focused on this as one of the key priorities within the Global Banking & Markets business.

Okay. Thanks, Denis. Just a bigger picture follow-up here. So it feels like Goldman generally takes market share during periods of stress. We just went through a pretty extreme period of stress in the banking system, and maybe we're getting on the other side of it, but perhaps not. With Credit Suisse now forcing an acquisition and capital likely becoming tighter in the banking system more broadly, are there new areas of opportunity for Goldman to take market share just in terms of where you're going to lean in with your balance sheet as you've done in the past? How should we think about maybe a couple of the top areas where you feel like you can incrementally take market share just as a result of what happened over the last month or so?

I think our core banking and markets franchise is incredibly well positioned. You can see the performance this quarter. I certainly wouldn't call it a top quartile for investment banking, traditional capital markets, IPOs, or M&A activity. But with a 16.7% ROE in our banking and markets segment, I think it's performing well. We have the breadth, footprint, and global franchise, I think, to continue to strengthen our share. As I commented a little bit earlier, we continue to be focused on looking at our performance on the top 100, now expand to the top 150 clients and making sure that we're moving up and capturing share and serving them well. I do think, given some of the things that have gone on, there are other opportunities. One of the interesting opportunities is the private wealth opportunity over in Europe. We see lots of customers that had accounts at both large Swiss institutions with a consolidation. We're certainly seeing opportunities in our private wealth business as people want to diversify the private wealth relationships we have. So that's an area for share that we're focused on. We continue to look across both Global Banking & Markets and also Asset & Wealth Management for opportunities to strengthen our position, and we think both franchises are very well positioned.

Thanks. Good morning. Wanted to follow up on the third-party fundraising. You had another great quarter, but certainly highlighted that a bit slow this year. I guess that's not surprising given the environment. But could you talk kind of longer term, as you think about maybe a rebound as economic conditions pick up? Also, the cycling of your vintages of funds in terms of what could be coming online this year that might result in continued strength or some pockets of slowness as you kind of go through that cycle?

This remains a big area of strategic focus for us. With $14 billion raised in the first quarter and now up to $193 billion, we feel very good about that. We indicated that the pace could slow over the balance of the year, but we do have about 20 offerings in market on a diversified basis across asset classes where we're actively looking to raise funds. I think it's really the breadth and the diversity of our franchise that's going to enable us to continue to raise those types of assets. Different strategies will play towards different types of environments and having the breadth of offering, I think, is proving to be beneficial. So even though we indicated it may slow later in this year, strong conviction that we'll be on pace for the total amount that we had indicated, just given what we see across our platform.

I'd just say, Dan, that one of the things that happens in this business is as you scale and you have the breadth that we have in this business, we set a target for 2024, but there is a longer-term goal on target, and there's lots of room for us to grow and continue to expand our footprint and position given the offering that we have across the broad alternative spectrum, the global nature of our platform. These are still long-dated fundraisings, long-cycle stuff, but there is a lot of runway for us once we get past the 2024 target too.

Good morning, David. Good morning, Denis.

Good morning.

David, in your comments about your principal investments, you mentioned obviously market conditions will impact how quickly you seek your targeted goal of $15 billion by the end of '24. In those market conditions, is it more the IPO and ECM markets that have a bigger headwind for you in this area? Or is it just general market levels and the activity we're seeing?

I appreciate the question, Gerard. All these things contribute. Financing availability contributes on certain assets; IPO market can contribute on certain assets, and just general valuations contribute on certain assets. I want to put the comments in perspective because I think that appropriately, we want to make sure people understand that when there is a lot of volatility or there are tough markets, it might slow this down. But we laid out at our Investor Day a plan to move over the coming few years to close to zero on the historical principal investments. We continue to have a target to get to $15 billion by the end of 2024. We're confident that we're going to execute on that target. So I think the way to think about this is we laid out a multi-year plan to reduce this down to close to zero and we're moving along on that target. I wouldn't take the comments that on any quarter-to-quarter basis, things can slow down. I wouldn't overstate that, but I want people to be aware that if the market or the environment turns more difficult, that could potentially slow us down. But we're very focused on this, and we're going to continue to work to execute on a quarter-to-quarter basis.

Very good. I know you mentioned that share repurchases are slowing down a bit, and in the second quarter, you are in a strong capital position. How crucial is it for the financial markets to stabilize in order for you to become more aggressive in buying back stock in the second half of the year?

It gets back to how we think about our overall capital allocation framework, and we're looking at opportunities to deploy against our client franchise where there could be opportunities for incremental deployment. Given some of the disruption that we're seeing in markets, we want to remain mindful of that. We want to remain committed to returning capital to shareholders, so we're looking to strike the right balance while being mindful of the overall operating environment.

Yes. I also just want to highlight, when we spoke at Investor Day, we said clearly that we are focused on accelerating buybacks. That is still in place. Quarter-to-quarter may vary, but that is still in place. And so I want that also kept in perspective too.

Hi, good morning. I think you hinted at improved dialog levels in underwriting to start the quarter. So can you just give a little more color on what you're seeing in the market and maybe how you see the ECM and DCM environment evolving, assuming we don't have another major step back in the macro?

Yes, I believe there are some signs of improvement. February showed some positive trends, although overall levels remain low. There are several initiatives we'd like to pursue, and we're starting to see some substantial transactions preparing to progress as the markets seem to have stabilized somewhat. However, we are still below the expected levels. As I mentioned earlier, history indicates that a lot of capital raising is necessary. Typically, companies need to access capital markets to implement their strategies, and during slow periods, these opportunities diminish. After about four to six quarters, we usually see a recalibration, and we're currently about five quarters in. My expectation or hope is that we won't experience any improvement from the currently low levels, but we are beginning to observe some encouraging signs again. We'll need to monitor how things evolve throughout the quarter and into the latter half of the year.

Okay. That's helpful. On FICC financing, I know that's been a focus of growth as well. While equities saw a significant improvement in spreads and volume, it seems we didn't see the same in FICC. Is there anything to consider regarding FICC in the financing space and how you view that moving forward?

Sure. Still very committed to the FICC financing business, which, as we indicated, was up slightly year-over-year. There continue to be good opportunities to deploy on behalf of clients. I think a lot of the market share progress and client engagement progress that we made over the last couple of years sets us up as one of the go-to calls for the provision of financing across the FICC space. That, combined with the equity financing, remain real priorities for our Global Banking & Markets business. We feel good about it.

Thank you. Good morning. Could I get you to talk a bit more about the Credit Suisse opportunity in wealth management? You mentioned Europe, but could you also talk a bit about Asia and Latin America? Are those regions where you as a firm have sufficient strength in wealth management to take more share from the Swiss banks since they are disrupted or is that a bit more marginal for you?

On the second part of the question, I think when you look at Latin America, it's more marginal for us, but we really do have a global footprint, and there are opportunities for us, especially as so many very wealthy individuals deal in dollars around the world. We also have a very strong Latin American presence that comes into our presence in Florida, obviously, where our private wealth business is focused on Latin America. So there is opportunity there. We continue to have a broad private wealth footprint in Asia. We haven't been as focused on growth and investment in Asia as we have been in Europe over the course of the last couple of years. We did launch a private wealth joint venture in Asia over the course of the last couple of months with ICBC, which I think is a small and slow opportunity, but is an opportunity for us. The interesting thing is whenever there is consolidation, as we look at very wealthy individuals that are on our private wealth platform, they tend to have multiple providers. Whenever there's consolidation, there are opportunities to talk to people as they rethink their footprint and the diversification of their footprint. Our private wealth teams are very focused on that and the way we serve those clients.

Hi, good morning. So my first question is about your focus on credit cards on the consumer side. Perhaps you can talk more specifically about what you see as your competitive advantages there and how you think about sizing up in credit cards at this point in the cycle. It's perhaps arguably quite late and some would argue that credit card growth tends to be a reflection of individuals not being able to manage expenses in a high inflationary environment.

Sure. Thanks. As you know, we have our card platform business. We've been building that over the last several years. We have a partnership with General Motors and a partnership with Apple, and we've been steadily investing in those relationships and building our balances. Given the overall environment, the total balances actually were down sequentially, just given seasonality and given some of our credit underwriting standards and origination volumes. But this is a business that we continue to invest in and believe it's an overall piece of the firm that is diversifying.

Great. Okay. I've got a second question more broadly about the crisis that we saw in March and how you think about how it evolved and maybe the repo situation as well. So if we think about the SVB situation, obviously, they decided to sell a lot of their assets below market value, and in the process, crystallizing a lot of those losses. In retrospect, it would have been a lot easier for them to repo those assets with the Fed and avoid those mark-to-market losses. I was just wondering if you could share your thoughts as to why that didn't happen. It would have been obviously to avoid a lot of the crisis confidence advice from that situation.

I don't have a comment on that, Andrew. There are various factors in the actions they took. Ultimately, there was a bank run at SVB, which led to the situation we are in. I won't go back and recount the decisions the management and the board made regarding that.

Hi. First, Goldman specific and then general. The Goldman specific is why now on the consumer repositioning, GreenSky sale, and Marcus loans? And then a more general question. To what degree did Silicon Valley impact the capital markets and the advisory appetite out there? Thanks.

Thank you, Mike. Regarding the timing, it's not really a matter of why now, but rather why we made the decisions we did over the past year. About a year ago, we strategically decided to narrow our consumer focus, and we have been executing that plan thoughtfully. This process takes time, and we are continuing to move forward with our execution. The changes we are making are significant within the broader context of Goldman Sachs. The Marcus loan portfolio was profitable but not a strategic fit, and while we believe GreenSky is a solid business and platform that is performing well, it no longer aligns with our narrowed focus. We are simply following through on the strategic decisions we've made, and we will keep acting in ways that we believe will benefit our shareholders over time. As for your second question about March and its impact on capital markets and M&A, it certainly had an effect. There was a period of unusual volatility that, as I mentioned, tends to slow down capital markets activity. We noticed an uptick in capital markets activity towards the end of February, and currently, equity markets are performing well while debt markets are showing reasonable stability. However, there are potential events that could generate further volatility, such as the ongoing discussions around the debt ceiling, which might also cause delays in bringing activities to the capital markets. Overall, it was a quiet quarter for investment banking activity, both for us and the market.

Thank you. Just one quick question, Denis, maybe. Around the Apple savings deposit, how do you intend to use the funds that come in? I appreciate early days in terms of the level of inflows that you may get on that product, but is that money just going to sit in cash earning Fed funds? Just trying to figure out what the NII revenue impact could be tied to those deposits.

Sure. Thanks. Across the firm, we have multiple funding channels, multiple sources that we tap in our BAU activities. We have multiple deposit channels that we actively work with each and every day. We view this as one incremental and diversifying source of deposits, which enables us to deepen our relationship with Apple and tap into their ecosystem and the clients that we serve together who are cardholders and want to take advantage of the ease of moving into a deposit account. We'll take those deposits along with all the other deposits in our portfolio and deploy it into the client franchise.

Yes. Thank you all for calling. We appreciate the time and interest in the firm. If you have any additional questions, feel free to call me or the rest of the Investor Relations team. Otherwise, we look forward to speaking with you soon. Thank you.