The operator, Katie, introduces the Goldman Sachs' First Quarter 2024 Earnings Conference Call and provides a disclaimer about the information being presented. CEO David Solomon and CFO Dennis Coleman then discuss the firm's strong performance and strategic objectives. They highlight the success of their actions in narrowing their focus and serving clients effectively in a complex market. They also address the question of when the capital markets will fully reopen, acknowledging the historically low levels of activity but expressing confidence in the future.

The capital markets are starting to reopen and there has been an increase in new issue market access, with successful IPOs and record debt issuance volumes. Refinancing and acquisition financing are also expected to contribute to a strong year for debt underwriting activity. The company has a strong presence in the global capital markets and is seeing growth in financing revenues. In Asset & Wealth Management, assets under supervision have reached a new record and there have been 25 consecutive quarters of long-term fee-based net inflows.

The company has a strong and diversified platform in public and private markets, with solid performance in Wealth Management, Alternatives, and Solutions. They are also at the forefront of advising clients on Artificial Intelligence and have a dedicated team of engineers exploring its applications. They anticipate significant demand for AI-related infrastructure and are focused on enhancing productivity and efficiency while maintaining risk management.

The author discusses the current state of the US economy and the potential impact of factors such as inflation, commercial real estate, and geopolitical tensions. They express confidence in the resilience of the economy and the strength of their company's client franchise, people, and culture. The financial results for the first quarter are also shared, with net revenues of $14.2 billion and net earnings of $4.1 billion. The impact of selected items on these results was deemed immaterial. The performance of each segment is then discussed.

In the first quarter, Global Banking & Markets generated $9.7 billion in revenues and had an 18% return on equity. Advisory revenues increased due to higher completed transactions, and the company remained number one in M&A league tables. Equity and debt underwriting revenues also rose. FICC net revenues were $4.3 billion, with strong performance in mortgages, credit, and currencies. The company also had record FICC financing revenues of $852 million. Equities net revenues were $3.3 billion, with a 14% increase in equities intermediation revenues and a slight increase in equities financing revenues. In Asset & Wealth Management, revenues were $3.8 billion, a 18% increase from the previous year, with record management and other fees. The sale of Personal Financial Management in November 2020 contributed approximately $60 million in fees in the year-ago period.

Incentive fees for the quarter were $88 million, and the company expects to reach their target of $1 billion in annual incentive fees in the medium term. Private banking and lending revenues were up substantially, and equity and debt investments revenues totaled $567 million. Total assets under supervision reached a record $2.8 trillion, with $24 billion in long-term net inflows. Alternative assets under supervision totaled $296 billion, driving $486 million in management and other fees. The company expects to raise between $40 billion and $50 billion in Alternatives this year and plans to grow their assets from $130 billion to $300 billion in the next five years. On-balance sheet Alternative investments totaled $44 billion, and the company plans to sell down the majority of their historical principal investment portfolio by the end of 2026. Platform Solutions revenues were $698 million.

In the first quarter, segment profitability improved with a pre-tax net loss of $117 million. The company expects to reach pre-tax breakeven next year. Net interest income increased due to an increase in interest-earning assets. The loan portfolio remained steady at $184 billion, with an increase in collateralized lending offsetting the sale of the GreenSky portfolio. The provision for credit losses was $318 million, mainly due to net charge-offs in the credit card lending portfolio. Expenses for the quarter were $8.7 billion, resulting in an efficiency ratio of 60.9%. The compensation ratio improved to 33%, while non-compensation expenses decreased year-on-year. The effective tax rate for the quarter was 21.1% and is expected to be around 22% for the full year. The Common Equity Tier-1 ratio was 14.7% and the company returned $2.4 billion to shareholders through stock repurchases and dividends. The company maintains a 170 basis point buffer above its capital requirements.

The paragraph discusses the first quarter results of Goldman Sachs, highlighting the strength of their global banking and markets franchise and growing Asset & Wealth Management business. The company remains committed to paying a sustainable and growing dividend and expects more flexibility on capital deployment. They are confident in their ability to deliver for shareholders and support clients, with a focus on strategic objectives and execution. The sustainability of the strong revenue, lower non-comp expenses, and lower provisions is attributed to the company's efforts to build a more durable business.

Over the past five years, the company has made significant progress in building their financing and markets businesses, and they believe there is still room for growth. They have also seen a doubling of management fees in their Asset & Wealth Management business and are focused on fundraising and improving margins. They have improved their client franchise and taken wallet share, and believe these are durable businesses that produce strong returns. They are focused on executing and enhancing their position in the market.

The speaker discusses the recent decrease in non-comp expenses and mentions that they will continue to focus on managing them. They also mention the potential impact of AI on the capital markets and Goldman Sachs' own efficiency. However, the speaker declines to comment on any potential comparison to the dotcom bubble.

The speaker believes that there is a lot of potential for growth in the stock market due to the increasing use of technology and the need for financing to support its expansion. This presents opportunities for investment banking and markets businesses, particularly in helping clients reposition their businesses and governments invest in infrastructure. At Goldman Sachs, the focus is on productivity gains and scaling their top employees, rather than just cost efficiency.

The speaker believes that the firm's success is dependent on their employees spending time with clients and utilizing productivity tools. They are also focused on increasing efficiency and reducing costs. In terms of growing their Asset Management revenues, the focus is on organic growth, but in the future, there may be opportunities for inorganic growth. The firm has set goals for top-line growth and fundraising in Alternatives for the year.

The company's $15 billion fundraising puts them on track to reach their goal of $40-50 billion this year and they believe their fundraising capabilities will continue for years to come. They are focused on performance and client experience in their Asset Management division. The 18% ROE for the Global Banking and Markets business in this quarter was strong, but not necessarily sustainable as they expect mid-teens returns through the cycle. The quarter's performance was higher due to increased client activity and market opportunities.

Goldman Sachs is confident in its ability to deliver strong results for shareholders, even in tough environments. The company's Global Banking and Markets division had a particularly strong quarter, but this should not be seen as the average performance for the business. The company's Wealth Management division also had impressive growth, with $17 billion in inflows and a 9% organic growth rate. This is due to the company's focus on expanding its platform and capturing the growing wealth in the world. The company's alts franchise and private banking activity are also contributing to this growth.

The speaker, Denis Coleman, responds to a question about the strong performance of the company in the first quarter. He mentions that the company's focus on wealth management has strengthened their position and there is potential for growth. He also mentions that there was no particular factor that led to the strong revenues in equities and fixed income, but rather it was a broad-based effort.

The company has focused on increasing market and wallet share, which has led to good opportunities for risk-taking on behalf of clients. The first quarter was particularly strong due to a favorable operating environment, and the company was able to take advantage of this through client engagement. The Global Banking and Markets segment saw strong performance in both FICC and Equities, with more upside in banking. The company also has an open platform for alternative solutions and products from various managers.

Goldman Sachs' unique offering for affluent clients is highly attractive and differentiated. The recovery in announced M&A has been impressive, but dominated by strategic deals. However, the engagement with sponsors has increased and there is potential for a pickup in activity in the coming quarters. This would be a significant tailwind for Goldman Sachs' business across banking and markets. The leveraged finance deals book is still operating at historically low levels, but Goldman Sachs has capital flexibility.

In the paragraph, the speaker discusses the potential for accelerated deployment in their business and the impact it could have on future quarters. They also mention that fundraising for alternative investments has been successful, but there is a lag in translating that into assets under supervision. Additionally, there was a decrease in fees from placement of capital for other managers on their platform in the first quarter compared to the previous quarter.

David Solomon, CEO of Goldman Sachs, confirms the company's commitment to transaction banking but acknowledges the need for more focus and financial discipline. The company has seen 8% year-over-year growth in this area but is also working on cleaning up past charges and narrowing its ambitions. While some may view this as a pullback, Solomon assures that the company remains committed and has made strategic hires to help execute their plans for the future.

Goldman Sachs CEO David Solomon acknowledges that the transaction banking business has not been as successful as they had hoped, with expenses and regulatory changes creating challenges. They are narrowing their global footprint and making adjustments to focus on profitable growth and delivering returns for shareholders.

David Solomon and Denis Coleman discuss the impact of competition in the syndicated and private credit markets on Goldman Sachs' investment banking and operations franchises. They note that as transaction volumes increase, the syndicated market will also see growth, and Goldman Sachs is well-positioned in both markets. They also mention their aspirations to continue investing and growing in the private credit space.

The paragraph discusses the importance of considering the response of private credit players during a credit cycle, as well as the ability of the company to combine its capabilities in the syndicated market and private credit. It also mentions a recent transaction as an example of the company's differentiated platform. The addition of Denis Coleman emphasizes that the syndicated loan market is now functioning well and that many borrowers are refinancing with more attractive pricing. Ultimately, all forms of credit are available to borrowers.

The speaker predicts that there will be a mix of underwritten and directly lent solutions in the capital structure, which will benefit Goldman Sachs. They also discuss the increase in sponsor-related change of control activity and how the bank is managing their capital in light of regulatory constraints.

Solomon discusses the firm's focus on the top 150 clients in their markets business and how this has contributed to their success in increasing wallet share. He notes that the ability to provide a seamless experience across all products and activities has been a key factor. While the activity in different products may fluctuate, the firm's goal is to have a comprehensive offering for these top clients, and they have made significant progress in this area. However, there is still room for improvement, as they currently hold a top three position with 117 of these clients.

Goldman Sachs is currently not performing as well as it could be in terms of client satisfaction, and they are working to improve their ranking among the top three firms. The company is focused on listening to their clients and implementing changes to better serve them. The equity investments line had a tough quarter, but it is expected to improve with a better exit environment.

The company saw a markdown in their public portfolio which affected their equity investment results. They have been selling down a portion of their historical principal investments and the remaining notional value and market conditions will impact the overall performance. They expect to generate around $2 billion in revenue per year and plan to sell off the rest of their historical principal investments by the end of the year. They expect to continue selling around $1.5 billion per quarter for the rest of the year.

The speaker asks about the impact of the Basel end-game proposal on the financing business in Markets. The speaker notes that the risk weightings for unlisted entities in securities financing are punitive compared to other jurisdictions. However, the business is expected to remain strong due to high demand from clients and the bank's leading market shares and capabilities. The speaker also mentions that the bank will make adjustments if needed to pricing or business mix to serve clients. In response to a question about buyback activity, the speaker says that there may be more flexibility on capital deployment if Basel is softened, potentially allowing for an increase in buybacks and a higher payout ratio.

Goldman Sachs is focused on maintaining capital flexibility and has a good amount of cushion at this time. They prioritize deploying capital to support their clients and their activities, followed by a sustainable and growing dividend. Only after that would they consider returning capital. The conference call has now ended.

This summary was generated with AI and may contain some inaccuracies.