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 third quarter 2021 earnings conference call. This call is being recorded today, October 15th, 2021. Thank you. Ms. Halio, you may begin your conference.

Good morning. This is Carrie Halio, head of investor relations at Goldman Sachs. Welcome to our third 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 in the earnings release and presentation. This audio cast is copyrighted material of the Goldman Sachs Group and may not be duplicated, reproduced, or rebroadcast without our consent. I am joined today by our Chairman and Chief Executive Officer, David Solomon, our Chief Financial Officer, Stephen Scherr, and our incoming CFO, Dennis Coleman. With that, let me pass the call to David.

Thank you, Carrie, and good morning, everybody. I'm joining you today from California, where we have been hosting one of our best-known client events, the Builders and Innovators Summit. We bring together over 100 of the most intriguing entrepreneurs in the world to exchange ideas and hear from thought leaders about how to build successful and enduring companies. I've heard from a number of them that they're extremely excited to meet with our team and with other entrepreneurs here in California. In addition, over the last few months, I've also been able to travel around to spend time with our employees and clients in person, which has been invigorating. In my conversations with clients and in the results we're reporting today, it's clear that our client franchise is on very solid footing. This quarter, we announced two acquisitions. A key pillar of the strategic vision that we laid out at our investor day in 2020 centered around diversifying our business mix toward more recurring revenues and durable earnings. There's no question that we have been successfully executing on our growth plans. And now we are further investing in the growth of the firm to accelerate our strategic evolution. First in August, we announced the acquisition of a leading European asset manager and investment partners. The addition of $320 billion in assets under supervision will help us achieve greater scale in our asset management platform, enhance our distribution network on the continent, and bolster our ESG capabilities. On the topic of ESG, as world leaders prepare to convene in Glasgow later this month for COP26, I would like to underscore the firm's commitment to working across our businesses to deliver on the goals of the Paris Agreement. This includes partnering with our clients to help drive climate transition and inclusive growth. And we're making progress toward our target of $750 billion in sustainable financing, investing, and advisory activity to help achieve these goals. My view is that the businesses and markets need policy that supports the deliberate transition to a more sustainable future. This includes developing a mechanism to put a price on the cost of carbon. This transition is complex and won't happen overnight. It will require both the public and the private sectors to do their part. And given that fossil fuels will remain part of our energy mix for the near future, it is critical that we strike a balance between good public policy and recognizing the consequences of the supply constraints that we face. Our second acquisition was Green Sky, which we announced in September. This transaction furthers our efforts to build the consumer banking platform of the future. It provides our consumer business with an attractive and high credit quality customer acquisition channel via an impressive network of over 10,000 merchants in a secularly growing market. It has a digital cloud-based infrastructure and product capabilities that are synergistic with our broader platform. And with the addition of our bank funding model, we expect to generate 20% plus returns at scale through recurring fee-based and net interest income revenues. Importantly, these customers will be our customers. They will live in the market's ecosystem where we can holistically help them manage their financial lives. Turning to page one of our presentation, we produce net revenues of $13.6 billion driven by year-on-year increases in three of our four business segments. On the bottom line, we delivered net earnings of $5.4 billion and quarterly earnings per share of $14.93. Our year-to-date revenues of nearly $47 billion and net earnings of over 17.5 billion are higher than any full-year results in our history and drove an ROE of nearly 26% and an ROTE of over 27%. Our performance underscores the strength of our client franchise and a supportive market environment. In investment banking, we produced our second highest quarterly revenues. Our clients were extremely active. They turned to Goldman Sachs for our leading M&A franchise, driving strategic activity and associated financing to elevated levels. We delivered solid results in global markets as we continue to focus on market share and engage with clients on a broader array of solutions. In asset management, assets under supervision get another record of 1.7 trillion, which will be further enhanced by the NNIP acquisition. We continue to transition our alternatives business to more third-party funds, and we have gained momentum as we spend a significant amount of time with new and existing institutional clients, raising $90 billion against our goal of $150 billion in gross fundraising commitments since our 2020 investor day. And in consumer wealth management, we had a record quarter. In wealth management, we've seen strong long-term fee-based inflows in the first nine months of the year and had big client wins in ACO that give us the opportunity to serve employees at all levels of their organizations. In consumer, we are now enabling 9 million customers to spend, borrow, and save on a multi-product platform. All in our strong performance, tireless focus on our clients, and relentless execution of our strategy, strengthen my confidence that we will continue to advance our strategic evolution and deliver higher, more durable returns for our shareholders. Let me now turn to page two. Broadly speaking, the current operating environment still has solid fundamentals, but there is increasing uncertainty around a number of factors. On the one hand, fiscal and monetary policy remain accommodative, and equity markets are still near all-time highs. COVID-19 vaccination rates are rising around the world. I believe that we are likely past the worst of the pandemic's effects on the global economy. And as technology behind the vaccines continues to improve, we will make further progress against the virus. That being said, there are a number of emerging areas of uncertainty we're paying close attention to. First, the trajectory of inflation, particularly wage inflation in the short term. Second, there remains significant uncertainty around the Delta variant. Third, there is ongoing political debate in the U.S. over economic policy, including the potential for additional infrastructure deals, the longer term extension of the federal debt ceiling, and tax increases. And fourth, the U.S.-China relationship remains complicated. Taken together, these items have the potential to be a headwind to growth. as further indicated by the downward revision in our economist U.S. GDP expectations earlier this week. Regardless of the market backdrop, I consistently hear from clients how much they value the high-quality service we provide, especially our differentiated advice and execution capabilities. As I look ahead, I remain optimistic about the opportunity set for Goldman Sachs and our ability to grow our firm. Activity levels remain high, particularly in investment banking, and we have solid momentum in our asset management client business. Before I close, I would like to thank Stephen for his nearly three decades of service to the firm. I've had the privilege to work with Stephen since the early 2000s, and I couldn't be more grateful for his counsel and friendship over the last 20 years. In January, as we announced previously, Stephen will be succeeded by Dennis Coleman, a 25-year veteran of Goldman Sachs who has held numerous leadership positions within investment banking, most recently as co-head of the financing group. He and Stephen have enjoyed a close working relationship for almost 20 years and are progressing toward a seamless transition in the CFO seat. With that, I'll turn it over to Stephen.