Goldman Sachs Group, Inc. (The)

Good morning. My name is Dennis, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs first quarter 2019 earnings conference call. This call is being recorded today, April 15th, 2019. Thank you, Ms. Miner. You may begin your conference.

Good morning. This is Heather Kennedy Miner, head of investor relations at Goldman Sachs. Welcome to our first quarter earnings conference call. On this call, we will reference our earnings presentation, which can be found on the Investor Relations page of our website at www.gs.com. No information on forward-looking statements and non-GAAP measures appear in the earnings release and presentation. This audio cast is copyrighted material of the Goldman Sachs Group, Inc., and may not be duplicated, reproduced, or rebroadcast without our consent. Today on the call, I'm joined by our Chairman and Chief Executive Officer, David Solomon, and our Chief Financial Officer, Stephen Scher. You will find today's agenda on page one of the earnings presentation. David will start with a high-level review of our financial performance, the current operating environment, and provide an update on our strategy. Stephen will then share initial observations from ongoing front-to-back business reviews and cover first-quarter results in each of our businesses. They'll then be happy to take your questions. I'll now pass the call over to David. David?

Thanks, Heather, and thanks to everyone for joining us this morning. I'm happy to be here with all of you. Let me begin on page two. We reported first quarter 2019 revenues of $8.8 billion, down 13% versus last year, reflecting a slower start to the year relative to the robust market backdrop of a year ago. Net earnings were $2.3 billion, resulting in earnings per share of $5.71. We posted a return on common equity of 11.1% and a return on tangible equity of 11.7%. While we aspire to deliver stronger results, the overall franchise performed well in the context of more muted market activity in the first half of the quarter. Through Friday, we ranked number one in global completed M&A, number one in announced M&A, and number one in global equity underwriting. We posted record net interest income in debt, investing, and lending, and record assets under supervision and investment management. Turning to page three, our results were generated in a mixed macroeconomic backdrop, particularly early in the quarter as a number of variables weighed on market sentiment. First, coming off the challenging market performance in the fourth quarter, we saw central banks pivot to an accommodative policy on rates. In the U.S., the Fed shifted from its prior path of incremental tightening to a more neutral stance. In Europe, the ECB signaled a move back to monetary stimulus. Central banks in Asia also shifted to more dovish rhetoric amid a backdrop of low inflation and somewhat disappointing growth. The net result was a lower volatility environment as government bonds rallied and yield curves flattened in the U.S. and Europe. With the VIX and other measures of volatility at near-record lows, trading activity remained low. Second, we saw a significant slowdown in IPO activity as a direct result of the government shutdown, which weighed on sentiment and kept issuers and investors on the sidelines. Despite the rebound in equity and credit markets, we saw lower client conviction. Third, ongoing geopolitical risks, including the U.S.-China trade and Brexit negotiations, added uncertainty. Notwithstanding the mixed backdrop, resilient macro fundamentals and rising asset prices spurred client engagement later in the quarter. Our institutional investing clients appeared less cautious in March. And as we engage with corporate clients around the world, we continue to hear a strong desire to execute strategic transactions and access the capital markets while the economy is growing. Market prices are favorable and financing markets are open. Our backlog for IPO activity is robust. In that vein, we are optimistic on the forward as underlying indicators remain encouraging, though it's still very early in the second quarter. On page four, let me give you an update on our strategic planning. Stephen will provide further context in a moment when he shares some initial takeaways from our front-to-back reviews. To drive long-term shareholder value, our strategy sets out three primary objectives. First, we aim to grow and strengthen our existing businesses. Second, we aim to diversify our business mix with new services to expand our opportunity set and increase the durability of our revenues. And third, we aim to operate more efficiently and effectively across all aspects, including expenses, financing, and capital. To achieve these objectives, we will endeavor to deliver one Goldman Sachs to our clients. We will focus on growth where there is an adjacency to our existing businesses. We will expand our addressable market to deliver more products to existing and new clients. And we will pursue this expansion via investments in talent, technology, and platforms. All the while, our emphasis will be on transparency with our stakeholders. As we seek to achieve our overarching goal of delivering superior products and services to our clients, we also look to leverage our spirit of innovation, our strength in engineering, and our deep culture of risk management. Our ability to approach problems creatively and our willingness to adapt have served us well over our 150-year history. Turning to page five, last month we announced an important partnership with Apple, a leader in innovation and consumer technology, with whom we are taking an important new step, our first credit card. Quite a lot has been said and written about this announcement, and we'll be able to talk more about Apple Card once the product has launched. We are excited about the opportunity and expect it will prove to be differentiated in the marketplace and create incremental value for the firm over time. But importantly, I want to turn your attention to the key elements of this project, as they represent the same drivers that underscore a range of major strategic growth initiatives underway at the firm. These elements include reimagined products that address pain points for corporations, institutions, and consumers, new technology unburdened by legacy systems that often slow down innovation, digital delivery mechanisms that produce scale and efficiency, and access to large customer populations. These elements are critical to our key growth platforms, including Marcus and Mass Affluent Wealth, where we will pursue partnerships to access large numbers of consumers, Marquee, our digital institutional platform, where the ability to innovate can help us engage at scale with our institutional client base. And Corporate Cash Management, where we can serve existing clients of the firm and offer differentiated products on a digital platform. With the incredible focus and energy of the people at Goldman Sachs, our strategy is beginning to take hold. We are on an evolutionary path. Our new investments will generate results over time. and will be complementary to our longstanding core business, which we will continue to strengthen. Ultimately, we believe the strategy will allow us to serve more clients with differentiated products and services, increase the durability and predictability of our earnings profile, deliver improved profitability, optimize our capital, and deliver higher long-term returns for shareholders. With that, I'll turn the call over to Stephen to give you some additional details and walk through the results in each of our businesses.