The Goldman Sachs Group, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Investment Banking: Clients turned to Goldman Sachs for its top M&A franchise, with announced M&A volumes YTD 30% higher year over year and 15% greater than the comparable five-year average. Advisory backlog rose for a fifth consecutive quarter. IPOs priced for clients performed well on the secondary market.
• Financing and Wallet Share: Both financing businesses hit revenue records, and Goldman Sachs ranked in the top three with 125 of the top 150 clients globally, up from 77 in 2019.
• Asset and Wealth Management: Momentum in alternatives with $18 billion raised, wealth management client assets at a record $1.7 trillion, and assets under supervision at a new record of $3.3 trillion.
• AI and Innovation: Invested in AI, rolling out the GS AI assistant and collaborating with Cognition Labs on Devan to enhance software development efficiency.
• Regulatory and Capital: Board approved a 33% increase in the quarterly dividend to $4 per share, and the CET1 ratio was 14.5% at the end of the second quarter, with a new requirement of 10.9% from October 1.

Segment Performance

• Global Banking and Markets: Generated revenues of $10.1 billion in the quarter, with an ROE for the first half of nearly 18%. Advisory revenues were $1.2 billion, up 71% year over year. Equity underwriting revenues were $428 million, essentially flat year over year, while debt underwriting revenues were $589 million, down 5% amid lower leverage finance activity. PIC net revenues were $3.5 billion, up 9% year over year. Equities net revenues reached a record $4.3 billion, with intermediation revenues up 45% year over year and financing revenues up 23% year over year. Total financing revenues were $2.8 billion, a new record for a sixth consecutive quarter.
• Asset and Wealth Management: Revenues were $3.8 billion. Management and other fees were up 11% year over year to $2.8 billion on higher average assets under supervision. Private banking and lending revenues were $789 million, up 12% year over year. Assets under supervision rose to a new record of $3.3 trillion, representing the 30th consecutive quarter of long-term fee-based net inflows. Alternative assets under supervision totaled $355 billion at the end of the second quarter, and gross third-party alternative fundraising was $18 billion in the quarter.

Guidance

• Optimistic about the investment banking outlook with M&A volumes up 30% y/y and 15% above the five-year average. Opportunities in alternatives, wealth management, and solutions to fuel growth. Confidence in continuing to deliver returns to shareholders through growth in asset and wealth management and other business segments.

Risks

• Geopolitical and Trade Uncertainty: Geopolitical concerns and trade agreements pose uncertainties, particularly affecting industries sensitive to trade policy.
• Regulatory Uncertainty: Lack of transparency in capital stress test models and the need for more clarity in the regulatory framework regarding capital requirements and stress testing.

Question and Answer

Q: Glenn Schorr asks about what to do with excess capital.

A: David Solomon and Dennis Coleman discuss deploying capital towards the client franchise to support client activity and returning capital to shareholders.

Q: Ebrahim Poonawala inquires about the CET1 ratio and SCB.

A: Dennis Coleman talks about the need for transparency in stress test results and deploying capital to enhance client relationships.

Q: Betsy Graseck asks about dividend sizing and AI impact.

A: David Solomon discusses the dividend growth strategy and AI investment for efficiency and growth.

Q: Mike Mayo asks about the M&A outlook.

A: David Solomon and Dennis Coleman discuss increased M&A activity, backlog growth, and client engagement.

Q: Steven Chubak asks about alternative investments and CET1 gains durability.

A: David Solomon and Dennis Coleman discuss the strategy to reduce alternative investments and the need for transparency in capital rules.

Q: Devin Ryan asks about tokenization and client coverage.

A: David Solomon talks about tokenization opportunities and the client coverage strategy.

Q: Erika Najarian asks about the CET1 buffer and transparency.

A: Dennis Coleman and David Solomon discuss the need for transparency in the regulatory framework and deploying capital to enhance client relationships.

Q: Dan Fannon asks about trading robustness and alternative fundraising.

A: David Solomon talks about the diversity of the trading business and strategic focus on third-party wealth distribution.

Q: Chris McGratty asks about medium-term ROE and dividend implications.

A: David Solomon and Dennis Coleman discuss the mid-teens ROE target and dividend growth strategy.

Q: Saul Martinez asks about the advisory gap and dividend implications.

A: David Solomon talks about the strength of the advisory franchise and sustainable dividend growth.

Q: Gerard Cassidy asks about inorganic growth hurdles and risks.

A: David Solomon discusses the high bar for acquisitions and focus on strategic fit and risk management.