Goldman Sachs Group, Inc. (The)

Good morning. My name is Katie, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs third quarter 2022 earnings conference call. This call is being recorded today, October 18th, 2022. 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 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 this morning by our Chairman and Chief Executive Officer, David Solomon, and our Chief Financial Officer, Dennis Coleman. Let me pass the call to David.

Thank you, Carrie, and good morning, everybody. Thank you for joining us today. Let me start by saying a few words on the operating environment. Global economy continues to face significant headwinds. Inflation remains high. Central banks are raising interest rates at a pace not seen in decades. Meanwhile, equity markets are well off the recent highs. Geopolitical instability and energy shocks are an ongoing concern, and GDP growth expectations are declining. Many of these trends accelerated toward the end of the quarter. For example, while our own financial conditions index has indicated steady tightening all year, we saw a sharp increase in the index starting in mid-August. Everywhere I go, macro themes dominate. My conversations with CEOs, they tell me that they are rethinking business opportunities and would like to see more certainty before committing to longer-term plans. As we head into the fourth quarter, my sense is that the outlook will remain unsettled, though economic performance will vary by region. I also expect volatility to persist as markets continue to digest these factors. Against this backdrop, I'm pleased that Goldman Sachs delivered solid results in the third quarter. As I've said before, the breadth and strength of our global franchise is a key differentiator for us, and client engagement remains strong. For the quarter, we generated net revenues of $12 billion, earnings per share of $8.25, a return on equity of 11%, and a return on tangible equity of 12%. Before handing it over to Dennis to review the quarterly results in detail, I would like to spend a moment on our strategic evolution. Turning to page two of the presentation, four years ago, we set out to enhance our client engagement efforts with the goal of further strengthening our world-class client franchise. Our One Goldman Sachs philosophy was born out of that endeavor, starting with a 30-client pilot evolving to what has now become the operating ethos of the firm. One Goldman Sachs has been successful well beyond our expectations, proving that the strength and breadth of our global client relationships are key drivers of the execution of our strategy and continued outperformance. These efforts have produced leading share gains, particularly in our core businesses, and have resulted in a 40% book value per share growth since our investor day in 2020. The execution of one Goldman Sachs over the last four years has amplified two foundational elements of our firm. First, the relationship and advisory mindset that underlies our investment banking franchise translates exceptionally well across client engagement more broadly. Second, the increasingly symbiotic nature of our businesses creates a virtuous ecosystem that results in a significant multiplier effect and drives market share. Because of this, we are making a series of organizational changes in the fourth quarter to take the next step in the evolution of our strategy. Changes will further strengthen our core businesses accelerate our ability to scale the growth platforms, and improve efficiency. As you can see on page 3, we are integrating our asset and wealth management businesses, as well as our investment banking and global markets businesses, into two important segments for the firm. We will also create a new segment called Platform Solutions that will consolidate our fintech platforms from across the firm, including transaction banking, consumer partnerships, and green sky. This segment will enhance our focus on building platforms that deliver digital financial services capabilities to corporate and institutional clients. We will further integrate our direct-to-consumer activities into wealth management, given the growing convergence of wealth and consumer banking. We will report our full-year 2022 earnings using these three segments, and we'll also host an Investor Day on February 28, 2023. We look forward to reviewing the details of our forward strategy across the businesses, although we will tell you now that our fundamental strategy remains the same, and we will be maintaining our principal financial targets. We are excited about the role that asset and wealth management will play in our forward growth plans. Across asset and wealth management, we are operating a fully scaled and integrated franchise, providing advice, solution, and solutions and execution for institutions and individuals across both public and private markets. Running these businesses together will allow us to holistically drive towards our $10 billion and $2 billion management fee targets. Our investment selection and performance for our clients has supported strong momentum, particularly in alternatives and wealth management. We also believe that reaching and serving employees in the workplace is a significant growth opportunity for Goldman Sachs. Through our strengthened capabilities in workplace and personal wealth, we can now address all the employees at the companies we serve. This expanded offering is a direct response to a clear push from C-suite leaders for a more democratized suite of advice and solutions. It's also clear that these clients prefer an integrated wealth management and banking offering, which presents us with a tremendous opportunity to connect with millions of clients through their workplace. Over the past few years, global markets and investment banking have been increasingly operating as a unified, leading, world-class franchise. We are the advisor of choice, supported by our number one league table positions across M&A and ECM. We continue to bolster our leading position as a market maker and risk intermediary for our clients in markets across the globe. As the world has gotten more complex, and our clients' demands have evolved, we are seeing that more and more of them are partnering with both global markets and investment banking to meet their needs. Synergies across these businesses from advice, financing, risk distribution, and hedging allows us to deliver differentiated solutions to our clients. This creates a significant multiplier effect and has helped us drive market share gains across the franchise in recent years. Running these businesses together will enable us to maximize our wallet share. Turning to page four. Platform Solutions is an end-to-end, primarily cloud-based technology platform business that embeds our best-in-class financial products and services into our clients' ecosystems to serve them and their clients and customers. In recent years, we saw an opportunity to leverage our preeminent corporate franchise, world-class risk management, and innovative culture to build modern digital products and, in the process, diversify our revenues and funding mix. We have built and launched a transaction banking platform, a digital consumer banking platform, the largest piece of which is credit card, and we acquired GreenSky. These platforms have led to partnerships with a number of our clients, such as Apple, General Motors, Stripe, American Express, and Fiserv. Through our relationships with Apple and General Motors, we already have the ability to access more than 100 million individuals in the U.S. The combination of our brand and Apple is unique, as proven by the reaction to Apple Card, which has been ranked number one in customer satisfaction for two consecutive years by J.D. Power. We have also extended our partnership to new products, Just last week, we introduced a new Goldman Sachs savings account for Apple Card that allows users to grow their rewards in a high yield savings account and to add funds to a linked banking account or directly from Apple Cash. This embeds a high yield savings account from Goldman Sachs directly into the Apple Card experience in Apple Wallet. Goldman Sachs and Apple are committed to expanding our relationship and we have recently extended and adjusted our partnership through the end of the decade in order to continue to help consumers live healthier financial lives. In transaction banking, we are delivering a differentiated, developer-centric, cloud-based product that allows for seamless integration into our clients' ecosystems. We are extremely encouraged by the client feedback and adoption rate of the offering. We now have approximately 425 active clients with greater than $70 billion in deposits globally as we leverage our corporate franchise to become the partner of choice in the payments arena. Our priority in platform solutions for the next few years is to continue to diversify Goldman Sachs revenue and funding while driving profitability. We will look forward to talking to you more about this segment at our Investor Day in February. Let me now address some additional details on our consumer business. Since 2016, we've made a significant investment, and on page five, you can see what we've achieved as a result. We serve over 15 million customers and generated more than $2.2 billion in revenues in the last 12 months. We've learned a lot in the six years since launching the deposit business, and this is shaping our execution priorities as we move forward. Turning to page six, for our direct-to-consumer strategy, We will focus on existing deposit customers and consumers that we already have access to through channels like workplace and personal wealth rather than seeking to acquire customers on a mass scale. It's a purposeful change that will allow us to rationalize spend on future builds and customer acquisition costs. In workplace and personal wealth alone, we already have the ability to reach over 9 million individuals. Our Marcus deposit customers remain core to our broader efforts. We will continue to grow the deposit offering and the level of service that has generated over $110 billion of retail deposits. We believe that all of our customers across all products will benefit from this reprioritization. Before I turn it over to Dennis to go through the results for the quarter, I want to highlight the following. Over the last four years, this leadership team has been working hard to grow, diversify, and strengthen Goldman Sachs. Our experience forms this new direction so that we can better serve our clients and amplify our strengths. This is an important and purposeful evolution of our strategic journey, setting us up to deliver on our targets and unlock shareholder value. Consistent with our strategy, we are focusing on the execution. We're focusing our execution on three key priorities, as you can see on page seven. which are to grow management fees, maximize wallet share, and grow financing activities, and scale platform solutions to deliver pre-tax profitability. We'll talk more about this at our Investor Day in February. I will now turn it over to Dennis.