GOLDMAN SACHS GROUP INC Q3 FY2024 earnings call

• David Solomon highlighted strong overall performance in Q3 despite selected items impacting ROE, emphasizing the strength of Global Banking and Markets and Asset and Wealth Management franchises. He discussed regulatory concerns around Basel III revision, noting lack of transparency and impact on the U.S. economy.
• Denis Coleman detailed financial results, including net revenues of $12.7 billion, EPS of $8.40, and ROE of 10.4%. He discussed segment performance, capital return (returned $2 billion to common shareholders in Q3), tax rate (22.6% for first nine months of 2024), and expense management (total quarterly operating expenses $8.3 billion).

Global Banking and Markets produced revenues of $8.6 billion in Q3. Advisory revenues were up sequentially and year-over-year, with the firm remaining number one in M&A league tables. Equity underwriting revenues rose 25% YOY to $385 million, and debt underwriting revenues rose 46% YOY to $605 million. FIC net revenues were $3 billion, down from prior year but saw a pickup in September, with FIC financing revenues reaching a record $949 million (up 30% YOY). Equities net revenues were $3.5 billion, up 18% YOY, with intermediation revenues up 29% and financing revenues up versus prior year. Asset and Wealth Management had revenues of $3.8 billion, up 16% YOY. Assets under supervision reached a record $3.1 trillion, with management and other fees at a record $2.6 billion for the quarter. Alternatives fundraising was strong, with over $50 billion raised YTD and expected to exceed $60 billion in 2024.

• AWM fundraising expected to exceed $60 billion in 2024, with over $50 billion raised YTD. The firm targets mid-teens ROE, focusing on growth in Global Banking and Markets and Asset and Wealth Management. It aims to narrow the consumer footprint to reduce drag on ROE. The plan to continue returning capital to shareholders via buybacks and dividends, with focus on organic growth opportunities in areas like capital markets and wealth management.

• Regulatory uncertainty around Basel III revision, including lack of transparency in capital requirements and potential impact on the U.S. economy. Impact of narrowing the consumer footprint on ROE. Geopolitical instability and global election implications affecting client behavior and economic activity.

Q: Comment on regulatory perception and trading business performance.

A: David Solomon discussed adapting to regulatory environments, stating the markets franchise is strong with deep client relationships and ability to adapt to different regulatory climates.

Q: On historical principal investments and future returns.

A: Denis Coleman talked about reducing the balance of historical principal investments (HPI) and the diversified portfolio of HPI exposures, noting lower revenue associated with reduced HPI but a long track record of delivering good returns.

Q: Competitive landscape in trading and private banking.

A: David Solomon discussed market share variability in Global Banking and Markets, emphasizing deep client relationships and integrated services. Denis Coleman spoke about the strategy to holistically cover clients in wealth management by integrating lending to improve market share.

Q: GM card and platform exit.

A: David Solomon mentioned continuing to narrow the consumer footprint, stating the Apple Card is being run and improved, with targeting Q3 2025 for closing the platform transfer.

Q: RWA impact of loan offerings vs private investments.

A: Denis Coleman explained that lending businesses have lower risk-weighted asset (RWA) density compared to private investments, making them more capital efficient and improving the nature of client relationships.

Q: Buybacks and organic growth.

A: Denis Coleman discussed capital deployment in organic growth areas like capital markets, highlighting opportunities in committed acquisition financing and wealth management financing, while emphasizing continued return of capital to shareholders.

Q: Alternative asset management fees.

A: Denis Coleman talked about the mix-dependent nature of fees in alternative asset management, with a multichannel strategy to grow the business and varying effective fees across different channels.

Q: Wealth management adviser growth.

A: Denis Coleman discussed sustained investment in the adviser base as part of a strategic effort to grow the wealth management franchise, aligning with the holistic approach to client services.

Q: Private credit competitors and positioning.

A: David Solomon discussed broad competitors across different private credit activities, noting the firm's ability to syndicate, underwrite, direct lend, and offer alternatives to meet client needs, with a focus on capturing secular growth in private credit.

Q: AWM margin trajectory and capital allocation.

A: Denis Coleman talked about aiming to improve AWM margins through scaling, improving alternative mix, and operating efficiencies, while balancing margin improvement with long-term investment decisions.

Q: Capital allocation and Basel uncertainty.

A: Denis Coleman discussed the buffer of 90 basis points to support client opportunities and prepare for regulatory uncertainty, noting the firm's history of adjusting activities based on regulatory feedback.