Goldman Sachs Group, Inc. (The)

Good morning. My name is Erica, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs First Quarter 2021 Earnings Conference Call. This call is being recorded today, April 14, 2021. Thank you, Ms. Minor. You may begin your conference.

Good morning. This is Heather Kennedy Minor, Head of Investor Relations at 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. No information on forward-looking statements and non-GAAP measures appear on 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 I am joined by our Chairman and Chief Executive Officer, David Solomon, our Chief Financial Officer, Stephen Scher, and Carrie Halio, our incoming Head of Investor Relations, who will host this call beginning in July. Carrie most recently served as the firm's Deputy Treasurer and CEO of GS Bank USA and began her career in credit risk as a bank analyst. She brings 22 years' experience at Goldman Sachs to her new role. As I leave this seat to assume the role of COO of our asset management business, I want to extend my sincere appreciation to each of you for your partnership over the years. On the call today, David will start with a high-level review of our first quarter performance and our client franchise. He will also provide an update on the operating environment and macroeconomic backdrop. Stephen will then discuss our first quarter results in detail. David and Stephen will be happy to take your questions following their remarks. I'll now pass the call to David. David?

Thanks, Heather, and thank you, everyone, for joining us this morning. Before I begin my remarks, let me thank Heather for leading the firm's investor relations effort for the past four years and welcome Carrie to the role. I will begin on page one of the presentation with a summary of our financial results. In the first quarter, we produced record net revenues of $17.7 billion. The strength and breadth of our client franchise continue to be evident as we delivered net earnings of $6.8 billion, record quarterly earnings per share of $18.60, and a return on equity of 31%, and a return on tangible equity of 32.9%, the highest in over a decade. Our first quarter results underscore the ongoing strength of our franchise and the supportive environment in which we operated during the quarter. These results also evidence our successful execution toward the firm's strategic priorities. We maintained our leading global positions across M&A and equity underwriting. We delivered the best performance in global markets in a decade, with strength in FIC and equities driven by solid client activity across our platform and reinforced by last year's market share gains. In asset management, we recognized significant net gains across our public and private equity positions, and we continued to harvest on-balance sheet investments in our efforts to transition the business to more third-party assets, where we are making progress in raising funds across a range of investing strategies. In wealth management, we continue to provide valuable advice to our ultra-high net worth PWM clients while we further scale our personal financial management business. And in consumer, we continue to make strong progress on our vision to create the leading digital consumer banking platform. This quarter, we launched Marcus Invest in the U.S., our digital investment offering. which provides consumers access to diversified investment portfolios with as little as a $1,000 investment. The customer response and uptake since launch has been positive, and we are focused on scaling the platform. We are also working toward the launch of digital checking in the U.S. and Marcus Invest in the U.K. Importantly, we maintained a resilient and highly liquid balance sheet as we continue to deploy our resources to support clients amid an evolving and dynamic market backdrop. With that, let me turn now to the operating environment on page two. As anticipated, we saw improvement in the macroeconomic backdrop during the first quarter, which was supported by the continued accommodative fiscal and monetary policies of central banks and governments around the world. At this stage, it is clear to me that the U.S. is poised for a strong recovery this year, led by consumer spending that is rebounding to pre-COVID levels. This sentiment is reflected in the capital markets, with U.S. equities hovering at or near records and bolstered by recent U.S. employment data and our economists' forecasts on GDP growth. Despite these positive developments, we recognize that the operating backdrop will undoubtedly evolve and that much of the global economic recovery will depend on the progress around COVID-19. While the rollout of vaccines is well underway in the U.S. and the U.K., distribution has been challenged in a number of other countries around the globe. and the prospect of new variants adds to potential concerns around the trajectory of the economic recovery. As you would expect, we remain vigilant to risks across markets. We are mindful of elevated valuation levels across certain asset classes, increased volatility in certain single-name stocks, and are aware of the inflationary risks inherent in the actions being taken to stimulate continued growth in the economy. Let me now also take a moment to share my views on a few important topics where I've been fielding questions from clients and other stakeholders. First, on the events related to Archegos Capital. This was a case of an investor with highly concentrated and leveraged positions. This is not the first time we've seen a situation like this, and it likely won't be the last. We have robust risk management that governs the amount of financing we provide for these types of portfolios. Our risk controls, all of which were put in place long before the March events, worked well. We identified the risk early and took prompt action consistent with the terms of our contract with the client. I am pleased with how the firm handled it, and it's a reflection of the engagement and communication of teams across Goldman Sachs, both in the business and on the control side of our firm. These events raise reasonable questions around market practice and transparency. They are worthy of debate, and we intend to play a constructive role in that dialogue. Next on SPACs, we continue to believe that providing sponsors a mechanism to access public markets for capital formation is an innovation that's here to stay. However, as a meaningful participant in this market, we will continue to be thoughtful regarding the transactions we underwrite, with a particular focus on the quality of sponsors, sponsor economics, investor protections, and disclosures. We believe the industry should evolve on these important issues in the interest of more efficient and transparent markets. I also want to touch on the topics of cryptocurrency, blockchain, and the digitization of money. As activities in these areas progress, there will be significant disruption and change in the way money moves around the world. Many central banks are looking at digital currencies and working to apply this technology to their local markets and determine the longer-term impact on global payment systems. There's also a significant focus on cryptocurrencies like Bitcoin, where the trajectory is less clear as market participants evaluate their possibility as a store of value. At Goldman Sachs, we continue to look for ways to expand our capabilities to support our clients' needs and evaluate applications to improve our organizational efficiency. Of course, we need to operate within the current regulatory guidelines. For example, we cannot own Bitcoin or trade it as principles. Goldman Sachs will play a role in these innovations as they are important to our clients and important to the future of global financial systems. Another topic coming up in stakeholder conversations is sustainability. We remain steadfast in our commitments to sustainable finance. Central to our purposes and organization, our programs are commercially attractive and utilize our expertise and capital to support all of our stakeholders. During the quarter, we issued our first sustainability bonds where we raised $800 million, the proceeds of which will be allocated towards initiatives aimed at accelerating climate transition and advancing inclusive growth. We also launched One Million Black Women, an initiative that I'm very proud of and through which the firm will commit $10 billion in direct investment capital and $100 million in philanthropic capital for capacity-building grants over the next decade to narrow the opportunity gaps for black women in the United States. Separately, we also committed an additional $500 million to launch with GS, our program designed to invest in diverse-led companies and fund managers, bringing our total commitments to $1 billion. Finally, I want to take a few minutes to comment on our people. I continue to hear from clients that the quality and dedication of our people is one of our great differentiators. The firm's quarterly results are a product of our client focus and the dedication of the employees of Goldman Sachs. Day in and day out, notwithstanding the challenges that they have all faced as we mark one year into the COVID-19 pandemic, our people have rallied to the needs of our clients. I would like to thank my colleagues around the world. I am in awe of their performance and of our results this quarter due to their hard work, dedication, and our culture of teamwork. It will always be a priority for our firm to attract and retain the best talent to serve our clients and execute on our strategy. We have a vibrant partnership and a deep bench of talent across the organization. Many will spend their entire career with us. Some will even become clients of the firm. This is a virtuous ecosystem that has been in place for decades. It is also aligned with the evolution of our partnership strategy where we're working to continue to make the partnership more aspirational. I recognize there's an enormous amount of discussion about how companies will operate their businesses post-pandemic. For Goldman Sachs, our people operate at their best when they are forging close bonds with colleagues and furthering the apprenticeship culture that has defined us. We have found the best way to do that is to work together in person on a regular basis. Let me be clear. Achieving the objective of bringing our colleagues back to the office is not inconsistent with with a desire to provide our people with the flexibility they need to manage their personal and professional lives, which is the way we have always run this firm. Given the experience of the past year, I am more confident than ever in our ability to facilitate this approach going forward. Over the course of the past few months, we have been welcoming thousands of colleagues back to the office in a manner consistent with safety guidelines in each city in which we operate. We have implemented testing and other protocols across our offices to make for a safer work environment and to provide those returning to the office with a sense of confidence in the return. Importantly, I look forward to increasing the number of employees returning as vaccination programs around the world expand, and we welcome new joiners to the firm's offices this summer. Regarding our junior bankers and others in the organization who have been working tirelessly to support our clients and at times have been overburdened, I've been passionate about the experience of our junior people throughout my career. As you can now see from our results, client activity is extraordinarily high, and I fully appreciate how busy our people have been. This has been exacerbated by the isolation of working remotely in a COVID-19 environment. To address this, we are taking concrete actions, including additional hiring, reallocating resources, and pursuing stricter enforcement of boundaries. In this 24-7 connected world, We have to help those transitioning into the workforce to understand that Goldman Sachs is a place where we work very hard to serve our clients, but all need to be thoughtful about personal resilience and well-being. In closing, I'm very pleased with how our people delivered for our clients and drove attractive returns for our shareholders. I'm confident in the state of our client franchise and the progress we are making as we execute our strategic priorities. With that, I will turn it over to Stephen.