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 second quarter 2021 earnings conference call. This call is being recorded today, July 13th, 2021. Thank you, Ms. Halio.

You may begin your conference. Thank you, Erica. Good morning. This is Carrie Halio, head of investor relations at Goldman Sachs. Welcome to our second 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. Note 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. I am joined by our Chairman and Chief Executive Officer, David Solomon, and our Chief Financial Officer, Steven Scher. David will start with a high-level review of our second quarter performance and our client franchise. He will also provide an update on the operating environment and the macroeconomic backdrop. Steven will then discuss our second quarter results in detail. David and Steven will be happy to take your questions following their remarks. I will now pass the call over to David.

Thanks, Carrie, and thank you, everyone, for joining us this morning. I will begin on page one of the presentation, With a review of our financial results, in the second quarter, we produced net revenues of $15.4 billion, our second highest result on record. The strength, breadth, and diversity of our business remained evident this quarter as we delivered net earnings of $5.5 billion and quarterly earnings per share of $15.02. Second quarter results contributed to our highest ever first half revenues of $33 billion and net earnings of over $12 billion, which drove year-to-date ROE of 27.3% and ROTE of 28.9%. Our performance underscores the strength of our client franchise and the constructive but more normalized market environment relative to a year ago. Our results also reflect ongoing progress on the firm's strategic priorities across all four of our businesses as laid out at our 2020 Investor Day. In investment banking, we continue to benefit from our leading M&A franchise, Given this position, we observed certain secular changes driving strategic activity as our key clients emerged from the pandemic. The drive for scale, the push to achieve operating efficiency, the shift to a digital economy across a broader industry set. We've maintained a number one rank and completed M&A for 19 of the last 20 years and have been the leader in equity underwriting for nine of the last 10 years. We are broadening our transaction banking platform. In June, we launched in the U.K., and we will now focus on expanding into Japan and other geographies. Although we are early in the rollout, initial client feedback has been quite positive. We delivered solid results in global markets, where recent market share gains contributed to our performance. We continue to deploy Balance Sheet to support client activity, and we are further expanding our means of engagement with our clients across both traditional and digital platforms. A good example is our marquee platform, where we are collaborating with MSCI to deliver improved portfolio analytics for our institutional clients via APIs. In asset management, our assets under supervision hit another record of $1.6 trillion as we serve clients by delivering best-in-class investment opportunities across a growing spectrum of traditional and alternative asset classes. We also continue to transition the business to more third-party funds. where we have raised $74 billion in gross commitments across a range of alternative investment strategies since our 2020 Investor Day. Additionally, during the quarter, we received preliminary approval for a joint venture with ICBC, China's largest bank. The JV will combine our expertise in asset management with ICBC's extensive access to retail and institutional clients. The partnership is a testament to our longstanding relationship with ICBC and represents a significant opportunity for us to grow internationally. In consumer and wealth management, we are seeing solid inflows in PWM from new and existing clients and ongoing synergies with our ACO and PFM businesses. We are also advancing on our vision of creating the leading digital consumer banking platform where customer satisfaction with our products and services continues to be very high. This quarter, we launched Apple Card Family, which allows co-owners on the same account to build credit together as equals. In addition, as we grow Marcus Invest and prepare for the rollout of checking and other services, we are building a more comprehensive consumer banking offering. All in, the progress on our strategic priorities combined with our continued execution reaffirms my confidence in the strength of our franchise and the increasing durability of our revenues. Reflecting this confidence, our Board of Directors declared a 60% increase in our quarterly dividend to $2 a share. This follows an increase of over 50% in 2019. Taken together, we have increased the dividend by 150% since I took my seat as CEO. While future increases won't necessarily be of this magnitude, we continue to prioritize a robust dividend as a part of our capital management philosophy. With that, let me now turn to the operating environment on page two. It's clear that we're in the middle of a significant economic rebound. This is particularly true in countries like the US and China, driven by the lifting of health and safety restrictions amid comprehensive vaccination programs. The broader economic improvement has also been underpinned by unprecedented support by central banks and, in the United States, the prospect of further fiscal stimulus in the form of infrastructure spending. A quarter ago, I mentioned my concerns about the prospect of the U.S. economy overheating, but recent commentary from the Federal Reserve indicates that the central bank is focused on this risk. which supports our economists' view that inflationary pressures might be transitory and that any resulting risks could be adequately managed. From here, I remain concerned about the prospect of a pandemic resurgence. The Delta variant, should it spread further, could spear policy actions that slow economic growth. We are already seeing this play out in places like Hong Kong and Australia and potentially in parts of Europe. While vaccine take-up is progressing, it is not consistent across communities and nations including parts of the United States. Widespread vaccine distribution and high vaccine rates are critical to open and thriving economies. I want to urge policymakers, government officials, and business leaders across jurisdictions to do all they can to facilitate these efforts. At Goldman Sachs, we are running programs to facilitate faster vaccinations for our people and their families in the United States, Hong Kong, and India, among other locations. Building on the support, we are providing communities in which we operate as we all navigate the challenges of this pandemic. More broadly, as risk managers, we closely monitor developments and remain attentive to a variety of potential risks away from the challenges associated with COVID. Right now, the geopolitical landscape, most notably China, and cybersecurity are top of mind. As always, we remain committed to helping our clients navigate these and other risks amid an ever-changing market backdrop. As I look ahead, I remain optimistic about the opportunity set for Goldman Sachs. Our investment banking backlog is at a record level as strategic discussions with our corporate client base remain high, reflective of elevated CEO confidence and the prospect of continued economic recovery. While consumer confidence may prove more volatile, as supplemental benefits expire in the U.S., corporate clients remain steadfast in their efforts to emerge stronger from the pandemic. In our markets business, ongoing client engagement and increased market share have strengthened our competitive positioning, notwithstanding more normalized flows and spreads relative to a year ago. And across our investing businesses, the current rate environment and search for yield are driving demand from both institutional and individual investors for our world-class scaled investment platform. Before I turn it over to Stephen, I'd like to close with a few final thoughts on the people of Goldman Sachs. We are an incredibly dedicated and resilient team, and I'm so proud of how we've worked tirelessly to serve our clients amid the challenges of the last 18 months. Again and again, I've heard from our clients that they say Goldman Sachs is ahead of the curve and that the engagement from our people has been stronger than ever. Speaking of that, as many of you know, we formally welcomed our colleagues in New York, Dallas, Salt Lake City, Hong Kong, and other locations to office this summer. With roughly 50% of our people in these offices back on a regular basis, I can tell you that seeing them in our buildings again has been completely invigorating. We recognize that various geographies are navigating different stages of the pandemic and will continue to provide our colleagues with the support they need. Going forward, we look to reopen more locations consistent with health and safety guidelines of each city in which we operate. I've heard from so many of our people over the last few weeks that they are glad to be back in the office, and clients appreciate that we are showing up. We have always given our people the flexibility they need to manage their professional and personal lives, and we will continue to do so. That said, I believe bringing us back together, forging the close bonds that support a culture of collaboration, has renewed the sense of teamwork and apprenticeship that allows our people and our business to thrive. I'm particularly excited to see nearly 5,800 interns and new hires who are joining us this summer many in person working side-by-side with long-tenured professionals of Goldman Sachs. I'll close by saying I'm very pleased with how our people continue to deliver for our clients and our shareholders. I'm especially confident in the strength of our client franchise amid an improving economic backdrop. Importantly, we are making progress in executing our strategy, and I believe we are on a path to sustainable mid-teens returns. With that, I'll turn it over to Stephen.