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Katie
Conference Facilitator
Good morning. My name is Katie and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs first quarter 2023 earnings conference call. This call is being recorded today, April 18th, 2023. Thank you, Ms. Halio. You may begin your conference.
Carrie Halio
Head of Investor Relations and Chief Strategy Officer at Goldman Sachs
Good morning. This is Carrie Halio, head of investor relations and chief strategy officer 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. I'm joined today by our Chairman and Chief Executive Officer, David Solomon, and our Chief Financial Officer, Dennis Coleman. Let me pass the call to David.
David Solomon
Chairman and Chief Executive Officer
Thanks, Carrie, and good morning, everyone. Thank you for joining us. In the first quarter, we delivered solid performance in a challenging environment. We produced net revenues of $12.2 billion and generated earnings per share of $8.79 and an ROE of 11.6% and an ROTE of 12.6%. The first quarter was certainly volatile, particularly for the banking sector. After a fairly benign operating environment at the start of the year, In March, we witnessed the collapse of two regional banks in the United States. Stress quickly spread to a number of institutions across the financial sector, where we saw ratings downgrades and steep valuation declines in very short order. These stresses were not limited to the U.S., as we saw when regulators helped arrange the combination of Switzerland's two largest financial institutions. It's important to appreciate the size of the disruption. Some of the market moves during the period were staggering, particularly in interest rates. To give you a sense of the magnitude, there have been just four days in the past 25 years that have seen two-year yields move by 50 basis points or more intraday. One was in September 2008, and three of them occurred in mid-March this year. Monday, March 13th, was the biggest one-day move in U.S. Treasury two-year yields in over 35 years. As we sit here today, it appears that the worst of the volatility is behind us. Prompt action by regulators was vital in bolstering confidence and stabilizing market sentiment. The events of the first quarter acted as another real-life stress test, and they demonstrated the resilience of the country's largest financial institutions. The GSIBs have been a source of strength for the financial system. We joined a consortium with 10 other large institutions in making a $30 billion uninsured term deposit and to First Republic Bank to send a strong vote of confidence in and commitment to the U.S. banking sector. As for Goldman Sachs, our long-standing and deeply rooted risk management culture helped us navigate this unusual environment. In our 154-year history, we have lived and managed through many periods of disruption, and it's our rigorous processes and planning for tail-risk scenarios before the stress that enable us to react quickly and effectively when they do occur. While it's impossible to predict the exact form a market stress will take, and we won't always execute perfectly, Our risk management culture, strong liquidity, and robust capital position have allowed us to navigate a complex environment while also continuing to actively support our clients. Given this backdrop, it was clear our clients needed help managing the risks and turned to us for our expertise and execution capabilities. Both fit in equities at a strong quarter as we help clients with their intermediation and financing needs. Underwriting activity, however, remained extremely muted and below recent averages, as capital markets were further delayed from reopening in a meaningful way given the market disruption. All-in global banking and markets delivered industry-leading returns of 16.6% in line with our through-the-cycle targets, even while advisory and capital markets activity remained muted. This franchise continues to show impressive resilience in a variety of market environments given our broad and diversified set of businesses. Management fees across asset and wealth management grew sequentially, but segment returns were in the mid-single digits as our on-balance sheet investments remained susceptible to volatility in asset prices. It is a strategic priority to continue to reduce these positions, and while we have made progress, there is still work to do. In platform solutions, we saw positive underlying trends this quarter with revenues greater than provisions, and we remain focused on driving this business towards profitability. We also continue to explore strategic alternatives within our consumer platform businesses. In the first quarter, we sold a portion of our Marcus Loan portfolio and transferred the remainder to held for sale. While this activity is now reflected in our AWM segment, it is an example of our narrowing our focus in the consumer space. Dennis will take you through the financial impact of that momentarily. Additionally, we are now initiating a process to explore the sale of GreenSky. We believe GreenSky is a good business and is performing well with first quarter originations and our core home improvement loans up over 25% year over year and a weighted FICO on total originations of over 780. Given our current strategic priorities, however, we may not be the best long-term holder of this business. We will update you on our progress if and when there are material developments. As I close, I'd like to say a few words about the forward outlook. The recent events in the banking sector are lowering growth expectations, and there is a higher risk of a credit contraction given the environment is limiting banks' appetites to extend credit. This is an acceleration of a trend in a situation we are watching closely. Businesses and consumers continue to adjust to higher interest rates. While the forward trajectory is still unclear, we continue to be cautious about the economic outlook, and we are operating the firm such that we are well prepared in the event that the environment weakens further. Overall, I feel very confident about the state of our client franchise and the long-term opportunity set for Goldman Sachs. As the events of the past quarter have illustrated, we are operating from a position of strength, and we have the people in place around the world to continue serving the broad range of clients' needs with excellence. And while much has transpired since we held our investor day at the end of February, we remain focused on our strategy to strengthen our leading global banking and markets franchise and grow our asset and wealth management business We are committed to delivering for clients and shareholders. I will now turn it over to Dennis to cover our financial results for the quarter in more detail.
Dennis Coleman
Chief Financial Officer
Thank you, David. Good morning. Let's start with our results on page one of the presentation. In the first quarter, we generated net revenues of $12.2 billion and net earnings of $3.2 billion, resulting in earnings per share of $8.79. Turning to performance by segment, starting on page three. Global banking and markets produced revenues of $8.4 billion in the first quarter, which generated an industry-leading ROE for the segment of 16.6%. Advisory revenues of $818 million were down 27% amid lower industry completions. Underwriting revenues continue to be below recent averages and were lower year over year. Despite the difficult backdrop, we were number one in the league tables for completed M&A and high-yield debt underwriting. We also ranked second for equity and equity-related underwriting. Our backlog fell quarter-on-quarter, primarily in advisory, but we remain cautiously optimistic on the outlook for the second half of the year and 2024, particularly for strategic M&A. We also expect investors will need more certainty before financing markets reopen broadly, but we have seen an increase in underwriting dialogues in the first two weeks of the second quarter. Big net revenues were $3.9 billion in the quarter, down 17%, as one of our strongest sets of results in rates was more than offset by significantly lower currencies and commodities revenues, which were very strong in the first quarter of 2022. In fixed financing, revenues rose slightly year over year. Equities net revenues were $3 billion in the quarter, down 7% year on year. A decline in intermediation revenues was partially offset by record financing revenues of $1.3 billion, with the sequential increase driven by higher activity and increased balances coupled with improved customer spreads. Moving to asset and wealth management on page five. Revenues of $3.2 billion rose 24% year-over-year, given improved results in equity and debt investments, and as management and other fees increased 12% year-over-year to a record $2.3 billion. Though underlying trends in the business remain strong, Private banking and lending revenues of $354 million fell year over year, driven by the partial sale of our Marcus unsecured loan portfolio, as well as a transfer of the remaining portfolio to held for sale in line with our strategic decision to narrow our consumer ambitions. The associated revenue reduction of $470 million was largely offset by a reserve release of $440 million. Additionally, We benefited from NII and incremental reserve releases associated with paydowns. All in, the Marcus Loan portfolio was profitable for the quarter. Net revenues for equity investments were $119 million, driven by $229 million in revenues related to CIEs and $85 million of gains related to our $2 billion public portfolio, partially offset by $195 million of net losses on our $12 billion private equity portfolio, primarily within real estate. This quarter, we experienced approximately $355 million of impairments on our CIE portfolio, which are reflected in operating expenses. Debt investments revenues were $408 million, driven by net interest income of $363 million. Moving on to page six. Total firm-wide assets under supervision ended the quarter at a record $2.7 trillion, driven by $68 billion of market appreciation, as well as $8 billion of long-term net inflows, representing our 21st consecutive quarter of long-term fee-based inflows. We also saw meaningful strength in liquidity products, with $49 billion of net inflows from new and existing clients amid the industry-wide flows into money market funds. Turning to page seven on alternatives. Alternative assets under supervision totaled $268 billion at the end of the first quarter, driving $494 million in management and other fees for the quarter. Gross third-party fundraising was $14 billion, relatively solid given the current environment, and bringing total third-party fundraising since our 2020 investor day to $193 billion. While we expect the pace of fundraising to slow for the rest of 2023, we continue to feel good about the path forward. and remain confident in achieving our 2024 target of $225 billion. On-balance sheet alternative investments total approximately $57 billion, of which $27 billion was related to our historical principal investment portfolio. Despite the challenging environment, we reduced these on-balance sheet historical investments by $2.3 billion in the quarter. We are committed to our strategy to reduce balance sheet density, including reducing the historical principal investment portfolio to less than $15 billion by 2024 year end. I'll now turn to platform solutions on page eight. Revenues of $564 million more than doubled year over year, driven by growth in loan balances and consumer platforms. This week we announced the launch of a savings account for Apple Card users. We are excited to deepen our partnership with Apple through this additional offering and to introduce another source of deposit funding for the firm. In transaction banking, deposit balances ended the quarter slightly higher versus year end, while revenues of $74 million were modestly lower quarter over quarter amid higher deposit costs. As we spoke about at our investor day in February, we're focused on further scaling this business with new clients and deepening our relationships with existing clients as we aspire to become their primary service provider. In this regard, we continue to see positive momentum on the platform as our client count grew by approximately 20% in the first quarter. On page 9, firm-wide net interest income of $1.8 billion in the first quarter was down 14% relative to the fourth quarter, driven by increased funding costs supporting trading activities within global banking and markets. Our total loan portfolio at quarter end was $178 billion, essentially unchanged versus the fourth quarter. Provision for credit losses reflected a net benefit of $171 million, including the previously mentioned reserve release associated with the market's unsecured lending portfolio and model updates, which were only partially offset by roughly $245 million in consumer net charge-offs. Spending a moment on our commercial real estate lending portfolio. As a quarter end, we had $29 billion of funded CRE loans. This portfolio is diversified by property type and includes $10 billion of exposure in the form of conservatively structured warehouse lending with typical LTVs of approximately 50%. Turning to expenses on page 10. Total quarterly operating expenses were $8.4 billion. Our compensation ratio for the quarter net of provisions was 33%. Quarterly non-compensation expenses were $4.3 billion, essentially unchanged versus the fourth quarter, but up versus last year. The majority of the year-over-year increase was driven by the aforementioned CIE impairments as well as expenses related to NNIP. Our effective tax rate for the quarter was 19%. For the full year, we expect a tax rate between 21% and 22%. Turning to capital on slide 11, our common equity tier one ratio was 14.8% at the end of the first quarter under the standardized approach, 100 basis points above our current requirement and at the top end of our management buffer. In the quarter, we returned $3.4 billion to shareholders, including common stock repurchases of over $2.5 billion and common stock dividends of roughly $870 million. While we expect to continue to focus on sustainably growing our dividend, We would note that repurchases in any given quarter will vary. Though we find our stock price attractive at current levels, in light of the current environment, we expect to moderate our repurchase levels in the second quarter relative to the first quarter. In conclusion, our first quarter results were solid in the context of a volatile environment. Our robust financial position allowed us to focus on serving our clients and helping them navigate this period of market disruption. Across our leading businesses in global banking and markets and asset and wealth management, We remain well positioned to continue to support our clients and execute on our strategic priorities. With that, we'll now open up the line for questions.
Katie
Conference Facilitator
Thank you. Ladies and gentlemen, we will now take a moment to compile the Q&A roster. If you would like to ask a question during this time, simply press star and the number one on your telephone keypad. If you would like to withdraw your question, press star and the number two on your telephone keypad. If you are asking a question and you are on a hands-free unit or speakerphone, we would like to ask you to pick up the handset when asking your question. Please limit yourself to one question and one follow-up question. We'll take our first question from Glenn Shore with Evercore.
Glenn Shore
Evercore
Hi there. I'm curious. You mentioned being optimistic about M&A in the back half, particularly on the strategic side. I'm curious.
David Solomon
Chairman and Chief Executive Officer
what and how you're what you're seeing that gives you that confidence obviously it must be conversations and then what about the sponsor community thanks yeah thanks Glenn and so appreciate the question and and you're right you know it has to do with dialogues and you know and things that we can see you know I'd say as we came into the new year there's no questions dialogues have picked up I there's no question and I always talk about this when when When we talk about it broadly, you know, confidence affects the ability for people to move forward and be active in the M&A market. And certainly what's gone on over the course of the last four weeks, you know, has slowed down some of the dialogues. But when you think about big strategic activity, I think most big companies continue to operate from a position where they're trying to make sure they have the scale and the strength competitively to advance their strategies. And so those strategic dialogues are quite active. And if you actually look, you know, over the course of the last week or two, there have been a handful of deals that have been announced, you know, that highlight that. We're seeing more dialogues like that. And so we're hopeful that more of that will come to fruition. I just think that's a steady part of the diet that companies need to continue to execute on to improve their strategic position. Now, with respect to financial sponsors, we're still going through a reset. You know, I'm encouraged by the fact in the quarter, you know, we saw one or two deals where where kind of the bid-offer between the value that a financial sponsor could achieve and the financing price came to meet. There was a good data point and a sell-down of a legacy deal in the market, but I would say the financial sponsor activity is still muted, and there's more upside as the reset on both value and financing costs continues. I think we're going to get there. I'd expect more in the second half of the year unless there was a really strong a much more pronounced economic disruption because it just takes time for people to reset. We've now kind of gone through five quarters of reset. And so generally speaking, historically, you kind of see these things turn on after four to six quarters. So I would just expect more of a base level of activity from what's been very, very muted.
Glenn Shore
Evercore
I appreciate that. And building on that, your comment about companies wanting to build on their strategic position, Maybe we could talk a little bit about your transaction banking platform, because it's still growing. I'm just curious, in the March events that we saw, did it cause any rethinking or maybe encouragement in terms of the direction of what you're doing with transaction banking and taking on those deposits? And was there any noticeable behavior of how those deposits acted during the March crisis? Thanks.
Dennis Coleman
Chief Financial Officer
Glenn, it's Dennis. Thanks for the question. I'd say that our conviction around the transaction banking business remains very, very strong. I think what we were able to observe in the first quarter, I highlighted in my script, and it's something that we were focused on strategically, is we grew the client count by about 20% in the quarter, which is a similar amount to all of last year. And we're very, very focused on continuing to improve our position with our clients, offer them more and more services, and grow this business steadily over the long term to create value. I think in terms of how the deposits themselves performed over the course of the quarter, they were in line with our expectations, and as we indicated, they ended on a quarter-over-quarter basis up just about a billion dollars.
Katie
Conference Facilitator
Thank you. We'll take our next question from Ibrahim Punawalla with Bank of America.
Ibrahim Punawalla
Bank of America
Hey, good morning. I guess two questions. One, David, you referred to the hypervolatility in the rates market, but would appreciate if you can address just fixed income trading, what happened there this quarter. Clearly, there was some lagged performance versus peers. To the extent you can, just give us a flavor of what happened and your expectations around how things evolved from here, how clients, macro funds holding up in face of this volatility.
David Solomon
Chairman and Chief Executive Officer
Yeah, so I appreciate the question. I mean, it's been interesting, you know, this morning just watching what I'd highlight is I think we had a very solid quarter in FIC. We had nearly a $4 billion quarter. And just to put that in perspective, you know, I think that's a top decile quarter for that. I think we've had, I think it was the eighth best FIC quarter on record. I think we've had 96 quarters. So it was a solid performance. And just the headline number of $4 billion, the way we look at it, that's a very solid FIC quarter. It was certainly a quarter that was volatility in client activity throughout the quarter. And I think we were well positioned to serve our clients and served our clients well. Some of the noise that I see just in the early morning release, our FIC business was down versus the first quarter of last year by 17%. But in the first quarter of last year, we had significant outperformance. If I remember correctly, our FIC revenues In the first quarter of last year, we're up year-over-year 21% when the competitor average was kind of flattered down. And you can go look at that from a base perspective. We had much more significant outperformance in the first quarter of 2022 because of our commodities business and the breadth of our commodities business. So if you remember back in the first quarter of 2022, the war with Ukraine started. There was more volatility in commodities, and clients were very active in commodities. And so it was an outsized quarter in commodities in the first quarter of 2022. But overall, I think FIC performance in the quarter was strong. We were there to serve our clients. And by any standards, it was a good quarter. I think given the environment that we're operating in, I would expect activity to continue to be active with our clients. It's certainly an uncertain period of time, and there's a lot of movement and positioning. And so we're finding our clients active at the moment.
Ibrahim Punawalla
Bank of America
Thanks for that. And then Just separately, I guess a big focus post-Invest Today was picking up pace on asset sales. How does the environment over the last month influence that? Equity markets obviously held up pretty well, X, the financials. So give us a sense of just asset sales, pace of that, how you're thinking about that, and any change today versus Invest Today, and how does that translate into pace of buybacks maybe in the back half of the year?
David Solomon
Chairman and Chief Executive Officer
Yeah, so we commented in the script about the fact that we made more progress on the disposition of our historical principal investments, and we highlighted that we reduced them from just under $30 billion to just over $27 billion during the quarter. Dennis also highlighted in his script that we feel on track to get to the $15 billion target number that we laid out over the course of the next 24 months. We feel good about that progress, and we're going to continue to move to reduce that to zero over time. There are a lot of positions. There's no question when there are market headwinds, some of that might go a little bit slower, but we're on pace with what we're trying to do and are committed to it. And obviously, we see a big change in that business as we grow management fees and we take the legacy investments out, the volatility in that business, we believe will change meaningfully.
Katie
Conference Facilitator
We'll take our next question from Christian Ballou with Autonomous Research.
Christian Ballou
Autonomous Research
Good morning, David and Dennis. Just to follow up on the question on the markets business, March did feel like a very tough month for some of your institutional clients. We saw hedge fund closures. We're hearing of deleveraging. So how does that inform your view of the outlook for the trading businesses and your market share particularly given, I guess, Goldman's exposure to the hedge fund community?
David Solomon
Chairman and Chief Executive Officer
I appreciate that question. We're obviously very focused on share and our share gain. We do participate with the hedge fund community, but when you look at our big competitors, they participate very actively with the hedge fund community too. We also are very significant with the broad institutional community. As I said just in the previous question, our clients are active at the moment because there's a lot going on. We're very focused on our market share. As we said in our investor day, we laid out more metrics and more of a focus on continuing to look at where we can advance our position with the top 100 clients that we deal with in our markets business. We continue to be optimistic about our share position, our overall ability to serve our clients, and we do think in this environment clients will continue to be active.
Christian Ballou
Autonomous Research
Great. Thank you. And maybe a question on capital return. Can you just clarify why you are slowing buybacks? Your capital ratios seem very healthy to your point that the stock is attractive at this level. So not sure that I get it. And then any comments on your appetite for strategic acquisitions here? There's been a lot of stress in the wealth management space, which is a space I know you guys are interested in. So curious here if you're conserving capital to go on the offense.
Dennis Coleman
Chief Financial Officer
Sure. Christian, it's Dennis. Thank you for the question around capital. And obviously in this case, appreciating the starting point in Q1 where we significantly increased the amount of buyback activity in Q1. We remain very committed to return of capital to shareholders, committed to sustainably growing our dividend, committing to the overall capital return profile. But we're also observing opportunities to deploy into the franchise on behalf of clients. And, you know, there are elements of uncertainty in the overall macroeconomic environment. And so, you know, our expectations is that buyback activity will be moderated, but we'll monitor that over the course of the quarter. As you say, we do like the stock price and remain, you know, committed to return a capital to shareholders.
Katie
Conference Facilitator
We'll take our next question from Stephen Chuback with Wolf Research.
Stephen Chuback
Wolf Research
Hi, good morning. So I wanted to start off with a question on platform solutions. You know, the business saw a step up in expense. I just wanted to understand how we should be thinking about the trajectory for expenses in the segment and similarly for provision going forward. Just following this quarter's significant reserve release, we know you had accrued reserves pretty conservatively for that segment, but the top line momentum is good. Would it just be helpful to get some perspective on how we should think about both the expense as well as the credit trajectory from here?
Dennis Coleman
Chief Financial Officer
Sure, thanks. In terms of the overall trajectory for the segment, I think we have to step back. Our number one focus is driving towards profitability. We also mentioned that we look to continue to improve the efficiency ratio. That's certainly over the course of a period of time, maybe not every given quarter, but we remain committed to what we outlined. As you say, we've seen good top line performance of the business. And the reserve release was a function of owning our point of sale business for some period of time, been able to observe it, take in more data, and GreenSky is actually performing better than we had modeled. So that was a contributor to the reserve release in the segment. As we think about it on a go-forward basis, it's obviously going to be a function of origination activities across the platform. You know, we now have a reserve level of roughly 13% in the consumer space, so that can give you a sense of how to model provisions based on, you know, forward origination activity.
Stephen Chuback
Wolf Research
That's great, Dennis. And just for my follow-up on expense, and maybe more of like a ticky-tack modeling question, the expenses were a bit higher than expectations, but I recall you noted at Investor Day the need to absorb some severance charges. You also had some pretty outsized impairments related to CIE portfolio. We're hoping you can maybe help us quantify the level of one-timers in the expense base this quarter, just as we think about benchmarking versus some of your longer-term efficiency targets.
Dennis Coleman
Chief Financial Officer
Thank you. Thank you very much. So, let me take that in pieces. In terms of on the compensation expense, any charges associated with severance and some of the actions that we took in the first quarter, are included within our overall comp accrual, which is at 33% of our revenues net of provisions. That's embedded inside of that number. In terms of the change in non-compensation expenses, they were flat on a quarter-over-quarter basis, but did include, as you know, 355 million of CIE impairments. And so we thought it was important to call that out. And that also explains a bunch of the year-over-year delta between Q122 and Q123. That together with, you know, full quarter impact of NNIP helps explain the delta in that line for the first quarter of this year.
Katie
Conference Facilitator
We'll take our next question from Betsy Gracek with Morgan Stanley.
Betsy Gracek
Morgan Stanley
Hey, good morning.
Katie
Conference Facilitator
Good morning.
Betsy Gracek
Morgan Stanley
So just a couple quick questions here. One on the consumer repositioning that you talked about today with the Marcus loan sales and with your comments around Green Sky. Would you say that as those are done and dusted, that would be it for the consumer repositioning?
David Solomon
Chairman and Chief Executive Officer
You know, I think, Betsy, what we've said clearly is we're narrowing the focus. We continue to be focused on our deposit platform and our credit card platform and I do think there are opportunities for us to do other interesting things strategically and how we think about operating it. But we're going to continue to examine all the things that we can do to make that as successful as possible. As I just highlighted, we don't think we're necessarily the best owner of Green Sky, so we're taking action on that. And then we'll continue to move forward to bring the consumer platform, the card platforms, to profitability.
Betsy Gracek
Morgan Stanley
And so there's some nice capital release that comes from that. How should we anticipate you're going to be utilizing that as we look forward here?
Dennis Coleman
Chief Financial Officer
So as we see the capital release from some of those activities, that just gives us incremental flexibility with respect to how we ultimately deploy that either back into the franchise and or returning that capital back to shareholders.
Katie
Conference Facilitator
Thank you. We'll take our next question from Mike Mayo with Wells Fargo.
Mike Mayo
Wells Fargo
Hi, just a little bit more on the consumer repositioning strategy. How much in the Marcus loans, I think there were 4.5 billion at your end, did you sell? And what do you intend to do with the rest?
Dennis Coleman
Chief Financial Officer
So we sold about a billion of the Marcus loans and the balance has been moved to help for sale. And so we'll be looking at moving down that position over time.
Mike Mayo
Wells Fargo
And so the marks that you took on these loans, How much of those marks were in the $4.5 billion? Was it on a subset or the entire portfolio?
Dennis Coleman
Chief Financial Officer
We sold a portion of the portfolio, and then we marked the balance to market. You'll see that reflected in the $470 million number moving through net revenues. Our reserve release was $440 million. If you think about the portfolio overall for the quarter, we generated incremental NII and we had other net paydowns. So for the whole quarter, we generated revenues north of $150 million, and it was profitable for the quarter. As we move forward into the second quarter, we'll continue to generate net interest income on that portfolio and move down the balance of those exposures.
Katie
Conference Facilitator
We'll take our next question from Brennan Hawken with UBS.
Gerard Cassidy
RBC
Good morning. Thanks for taking my questions. I'd like to follow up first on a question that Glenn asked about the transactional banking. In the past, in conversations, I believe that you've indicated that a lot of the competitors are the regional banks there. So I want to confirm that that's the case. And then given some of the stress that we've seen and concerns around some of those providers, how are you adjusting your strategy in order to continue to build on the momentum that you seem to have shown here in the first quarter? And if we see that continued stress, would you pursue inorganic venues to add scale or capabilities?
David Solomon
Chairman and Chief Executive Officer
Yeah, so I appreciate the question, Brennan. We think in transaction banking, we have a very good platform and a very good product. And the feedback that we're getting from clients about the product offering, how it works, what it allows corporate treasurers and CFOs to do is very positive. It's obviously, you know, attractive for us to take deposits, but we want deposits that are stickier and adhere because people are operating on our platform. And so, you know, we're working hard to make sure as we're adding clients, we're bringing the value that attaches the technology to what they're doing in a way that grows that platform. We are seeing positive results. But this takes time. These are long-cycle decisions. They're not, you know, day-to-day decisions and short-term trades. As Dennis highlighted, we had good momentum in terms of customer count where people added themselves to our platform. And so we're going to continue to focus on that. I do think, given the size and the strength of Goldman Sachs as a G-SIB and the way we're positioned, we're well-positioned to compete with our clients for this business, coupled with the fact that we have an excellent product offerings. So we are going to stay focused on that. We expect the business to grow over time.
Gerard Cassidy
RBC
Great. Thanks for that, Culler. Appreciate it. And then for my follow-up, you all just announced this morning the new deposit arrangement with Apple. And the yield on that is pretty close to Marcus, a little above Apple. How should we think about the economics of that Apple relationship and the deposit specifically? And then how do you manage potential risks for cannibalization with your own Marcus offering? Thanks.
David Solomon
Chairman and Chief Executive Officer
Thank you for the question. So obviously, this is something that we launched yesterday that gives us another deposit channel. It's the opportunity for somebody that's a credit card holder to put a deposit on. We've obviously looked very closely at the overlap between who holds credit cards and who has a market deposit. And that overlap is small. But we'll obviously watch closely to see whether or not there's any cannibalization. But this is a way for us to try to open up another deposit channel. And it's always good for us to broaden our deposit base. And so this is small at the moment. And we'll watch it carefully. But I think it's an interesting opportunity for the firm.
Katie
Conference Facilitator
We'll take our next question from Devin Ryan with JMP Securities.
Andrew Lim
Society General
Hey, great. Good morning, David, Dennis. I want to just touch on the equity financing strength in the quarter. I know you kind of highlighted spreads and customer activity, but also appreciate this is an area of focus for the firm, bigger picture. So just love to think about kind of where we're jumping off of into the second quarter and whether the first quarter benefited from the March stress and maybe idiosyncratic things that happened during the quarter or if this is actually a reasonable kind of jumping off point and just maybe a better outlook for that business for the rest of the year.
Dennis Coleman
Chief Financial Officer
Sure. I appreciate that question. I'll give you some context to help you understand sort of the sequential activity and the direction. So, you know, our overall balances were a lot lower into the end of last year based on, you know, overall market levels. and also as we reduced our footprint. And so as we came into the first quarter, we were able to re-expand the capacity. Clients engaged with us. We saw an increase in balances, increase in client activities, increase in customer spreads. We've had in place for some time a strategy to identify new types of clients that could come onto the platform and engage with us. And so I'd say that we're working sort of full speed ahead on that and continue to be very, very focused on this as one of the key priorities within the global banking and markets business.
Andrew Lim
Society General
okay thanks dennis um just a bigger picture follow-up here so uh you know feels like goldman generally takes market share during periods of uh stress and so uh we just went through a pretty extreme period of stress in the banking system and maybe we're getting on the other side of it but you know perhaps not and so you know with credit suites now um forcing acquisition and you know capital likely becoming tighter in the banking system more broadly Are there new areas of maybe opportunity for Goldman to take market share just in terms of where you're going to lean in with your balance sheet as you've done in the past? How should we think about maybe a couple of the top areas where you feel like you can maybe incrementally take market share just as a result of what happened over the last month or so?
David Solomon
Chairman and Chief Executive Officer
I think our core banking and markets franchise is incredibly well positioned. You can see the performance this quarter. I certainly wouldn't call it a top quartile for investment banking, you know, traditional capital markets, IPOs, you know, M&A activity. But with a 16.7% ROE in our banking and market segment, I think it's performing well. We have the breadth, the footprint, the global franchise, I think, to continue to strengthen our share. And as I commented, you know, a little bit earlier, we continue to be focused on looking at our performance on the top 100, now expanding to the top 150 clients, and making sure that we're moving up and capturing share and serving them well. I do think, given some of the things that have gone on, there are other opportunities. I think one of the interesting opportunities is the private wealth opportunity over in Europe. You know, we see lots of customers that had had, you know, accounts at, you know, both large Swiss institutions. With a consolidation, we're certainly seeing opportunities in our private wealth businesses. People want to diversify the private wealth relationships we have. And so that's an area for share that we're focused on. So we continue to look across both global banking and markets and also asset wealth management for opportunities that we can strengthen our position, and we think both franchises are very well positioned.
Katie
Conference Facilitator
We'll go next to Dan Fannin with Jefferies.
Devin Ryan
JMP Securities
Thanks. Good morning. I wanted to follow up on the third-party fundraising. You have another great quarter, but certainly highlighted that been slow this year. And I guess that's not surprising given the environment. But could you talk to kind of longer term, you know, as you think about maybe a rebound as the economic conditions pick up and also the cycling of your vintages of funds in terms of what could be coming online this year that might result in continued strength or some pockets of slowness as you kind of go through that cycle?
Dennis Coleman
Chief Financial Officer
So thanks a lot for the question. Obviously, this remains a big area of strategic focus for us. With $14 billion raised in the first quarter and now up to $193 billion, we feel very good about that. We indicated that the pace could slow over the balance of the year, but we do have about 20 offerings in market on a diversified basis across asset classes where we're actively looking to raise funds. I think it's really the breadth and the diversity of our franchise that's going to enable us to continue to raise those types of assets. Different strategies will play towards different types of environments, and having the breadth of offering, I think, is proven to be beneficial. So even though we indicated it may slow later in this year, strong conviction that we'll be on pace for the total amount that we had indicated, just given what we see across our platform.
David Solomon
Chairman and Chief Executive Officer
And I just say, Dan, that one of the things that happens in this business is you scale, and you have the breadth that we have in this business, You know, we set a target for 2024, but there's a longer-term goal and target, and there's lots of room for us to grow and continue to expand our footprint and position, given the offering that we have across the broad alternatives spectrum, the global nature of our platform. And so this is still, you know, these are long-dated fundraisings, long-cycle stuff, but there's a lot of runway for us once we get past the 2024 target, too.
Devin Ryan
JMP Securities
Thanks. And then just a follow-up, Dennis, on the expense side, you know, the billion dollars of savings from realization of programs that you highlighted at Investor Day, what was realized in the first quarter or maybe just remind us of the pacing of some of those savings as we think about the range of this year?
Dennis Coleman
Chief Financial Officer
So, you know, at Investor Day, we outlined that over the course of the year, you know, we'd have, you know, run rate payroll expense of about $600 million and non-comp efficiency about $400 million. And we see about half of that reflected in this year in the balance thereafter. I'd say we're on target for those initiatives and those efficiencies. And we continue to look at it, and we continue to see other opportunities to incrementally drive efficiency across our platform. One area we had focused on for quite some time was overall level of professional fees. We continue to grind that down. And if you look at some of the sequential components of our overall non-compensation expense, you'll see we're making good progress against most of the line items.
Katie
Conference Facilitator
We'll take our next question from Gerard Cassidy with RBC.
Jeremy Figge
BNP Paribas
Good morning, Debbie. Good morning, Dennis. David, in your comments about your principal investments, you mentioned obviously market conditions will impact how quickly you get to your targeted goal of $15 billion by the end of 2024. In those market conditions, is it more the IPO and ECM markets that have a bigger headwind for you in this area, or is it just general market levels and the activity we're seeing?
David Solomon
Chairman and Chief Executive Officer
I appreciate the question, Gerard, and I think all these things contribute. Financing availability contributes on certain assets. IPO market can contribute on certain assets. Just general valuations contribute on certain assets. I want to put the comments in perspective because I think that appropriately, we want to make sure people understand, obviously, that when there's a lot of volatility or there are tough markets, it might slow this down. But we laid out our investor day plan to move over coming few years you know to close to zero on the historical principal investments you know we continue to have a target to get to 15 billion by the end of 2024 we're confident that we're going to execute on that target so you know i think the way to think about this is we laid out you know a multi-year plan to reduce this down to close to zero and we're moving along on that target um i wouldn't you know i wouldn't take the comments that on any quarter to quarter basis You know, things can slow down. I wouldn't overstate that. But, you know, I want people to be aware that if the market or the environment, you know, turns more difficult, that could potentially slow us down. But we're very focused on this, and we're going to continue to work to execute on a quarter-to-quarter basis.
Jeremy Figge
BNP Paribas
Very good. And I know you guys touched on the share repurchases, you know, slowing it down a bit. And here in the second quarter, you're very well capitalized. If market conditions – or I should ask, I guess – How important is it that the financial markets need to stabilize for you guys to maybe get more aggressive in the second half of the year in buying back the stock?
Dennis Coleman
Chief Financial Officer
Thanks for the question. Look, I think it just gets back to how we think about our overall capital allocation framework, and we're looking at opportunities to deploy against our client franchise where there could be opportunities for incremental deployment given some of the disruption that we're seeing in markets. We want to remain mindful of that. We want to remain committed to return of capital to shareholders. And so, you know, we're looking to strike the right balance, you know, while being mindful of the overall operating environment.
David Solomon
Chairman and Chief Executive Officer
Yeah, and I also just want to highlight when we spoke at Investor Day, you know, we said clearly that we are focused on accelerated buybacks. That is still in place. Quarter to quarter may vary, but that is still in place. And so, you know, I just want that also, you know, kept in perspective too.
Katie
Conference Facilitator
We'll take our next question from Jim Mitchell with Seaport Global.
Jim Mitchell
Hey, good morning. I think you hinted at improved dialogue levels and underwriting to start the quarter. So can you just give a little more color at what you're seeing in the market and maybe how you see the ECM and DCM environment evolving, assuming we don't have another major step back in the macro?
David Solomon
Chairman and Chief Executive Officer
Yeah, I think there have been some green shoots. There were certainly some green shoots in February. Levels are still muted. There are obviously a number of things out there that would like to get done, and we're seeing some indication of some significant transactions starting to prepare to move forward, given markets seem to have settled down a little bit. But I still think we're at a below trend level. As I said earlier in the conversation, history tells you that there's plenty of capital raising that needs to get done. Generally speaking, people have to use the capital markets to execute on their strategies. When you have these slowdowns or these windows closed, they typically, you get that rebalance after four to six quarters. We're kind of five quarters in. And so, you know, my expectation or hope is we will see improvements from what have been very muted levels. But at this point, you know, we had a very volatile March, and I'd say things are still slow, but we are starting to see some more green shoots again. and we'll just have to watch and see how things unfold in the quarter and into the back half of the year.
Jim Mitchell
Okay, that's helpful. And then maybe just on FIC financing, I know that's been a focus of growth as well outside of equity, saw a pretty strong improvement in spreads and volume, but it doesn't look like we saw that in FIC. Anything to think about on the FIC side on the financing space and how you see that going forward?
Dennis Coleman
Chief Financial Officer
Sure. Still very, very committed to the FIC financing business, which, as we indicated, was up slightly year over year. There continue to be good opportunities to deploy on behalf of clients. I think a lot of the market share progress and client engagement progress that we've made over the last couple of years, you know, sets us up as one of the go-to calls for the provision of financing across the fixed space. So, you know, that combined with the equity financing remain real priorities for our global banking and markets business. We feel good about it.
Katie
Conference Facilitator
We'll take our next question from Jeremy Figge with BNP Paribas.
Jeremy Figge
BNP Paribas
Thank you. Good morning. Could I get you to talk a bit more about the Credit Suisse opportunity and wealth management? You mentioned Europe, but could you also talk a bit about Asia and Latin America? Are those regions where you as a firm have sufficient strength in wealth management to take more share from the Swiss banks? Is that disrupted or is that a bit more marginal for you?
David Solomon
Chairman and Chief Executive Officer
On the second part of the question, I think when you look at Latin America, it's more marginal for us. But we really do have a global footprint, and there are opportunities for us, especially as so many very wealthy individuals deal in dollars around the world. We also have a very, very strong Latin American presence that comes into our presence in Florida, obviously, where our private wealth business is focused on Latin America. So there is opportunity there. We continue to have a broad private wealth footprint in Asia. We haven't been as focused on growth and investment in Asia as we have been in Europe over the course of the last couple of years. We did launch a private wealth joint venture over in Asia over the course of the last couple of months with ICBC, which I think is a small and slow opportunity, but is an opportunity for us. I think the interesting thing is whenever there is consolidation, as we look at very wealthy individuals that are on our private wealth platform, they tend to have multiple providers. So whenever there's consolidation, there are opportunities to talk to people as people then rethink their footprint and the diversification of their footprint. And so our private wealth teams are very focused on that and the way we serve those clients.
Andrew Lim
Society General
That's very helpful. Thank you.
Katie
Conference Facilitator
Thank you. We'll take our next question from Andrew Lim with Society General.
Andrew Lim
Society General
Hi, good morning. So my first question is about your focus on credit cards on the consumer side. Perhaps you can talk more specifically about what you see as your competitive advantages there and how you think about sizing up in credit cards in this point of the cycle. It's perhaps arguably quite late and some would argue that credit card growth tends to be a reflection of making individuals not being able to manage their expenses in high inflationary environments.
Dennis Coleman
Chief Financial Officer
Sure, thanks. So, as you know, we have our card platform business. We've been building that over the last several years. We have a partnership with General Motors, a partnership with Apple, and we've been steadily investing in those relationships and building our balances. As you indicate, given the overall environment, the total balance is Actually, we're down sequentially just given seasonality and given some of our credit underwriting standards and origination volumes. But this is a business that we continue to invest in and believe it's an overall piece of the firm that is diversifying.
Andrew Lim
Society General
Great. Okay. I've got a second question more broadly about the crisis that we saw in March and how you think about how it evolved and maybe the repo situation as well. So if we think about the SAV situation, obviously they decided to sell a lot of their assets below market value and in the process crystallizing a lot of those losses. I guess in retrospect, it would have been a lot easier for them to repo those assets with the Fed and avoid those mark-to-market losses. And I was just wondering if you could share your thoughts as to maybe why that didn't happen. It would have been an obvious way to avoid a lot of the crisis of confidence that emerged from that situation.
David Solomon
Chairman and Chief Executive Officer
I don't really have a comment on that, Andrew. There are a variety of factors in the actions that they took. Ultimately, there was a bank run at SCB. and that led to the situation we are, but I'm not going to go back and recount what decisions that management and that board made around that.
Katie
Conference Facilitator
Thank you. We'll take a follow-up from Mike Mayo with Wells Fargo.
Mike Mayo
Wells Fargo
Hi. First, Goldman-specific and then general. The Goldman-specific is, you know, why now on the consumer repositioning GreenSky program? and more general question, to what degree did Silicon Valley impact the capital markets and the advisory appetite out there? Thanks.
David Solomon
Chairman and Chief Executive Officer
Yeah, thanks, Mike. So, you know, first, you know, why now? It's actually not why now. It's like it's why over the last 12 months. As you know, you know, we made a strategic decision kind of 12 months ago at this point to really narrow our consumer focus And we've been executing on it. And it's not, you know, narrowing that focus and making those decisions and executing on it are not things that can be done, you know, instantaneously. So we've gone through a very, very thoughtful process. And we're moving forward, you know, in the execution of that. You know, again, I think these things also, I just felt like they're small in the overall scope of Goldman Sachs. You know, the market's loan portfolio was profitable but small, wasn't strategic. Green Sky, as we highlighted today, we think it's good business, good platform. And actually, as we watch it perform, it's performing well. But given the way we've narrowed our focus, not strategic for us. And so we're simply executing on the decisions that we laid out. And we'll continue to execute on them to do the things that we think are right over time to deliver for our shareholders. On the second question, which is just what happened in March, how did it affect capital markets? in M&A, I think it had an effect. It was a highly, as I highlighted in my comment, it was kind of an unusual few-week period with really, really outsized volatility. And as you and I have discussed before, whenever you have that kind of volatility, it slows down capital markets activity. So I thought we were starting to get a little bit more capital markets activity at the end of February. I've noticed now equity markets seem to be behaving well, debt markets are behaving reasonably well. I can't say that there won't be some other event that creates stress. There certainly are other things on the horizon that you could see that could create volatility, like the negotiation around the debt ceiling, just to point to an example. But I do think when you have that kind of volatility, it slows down or it has people push out things that they were thinking about bringing into the capital market. So yes, I do quarter, it was certainly a pretty muted quarter for investment banking activity for us and for the market as a whole.
Katie
Conference Facilitator
We'll take a follow-up from Ibrahim Poonawalla with Bank of America.
Ibrahim Punawalla
Bank of America
Thank you. Just one quick question, Dennis, maybe. Around the Apple savings deposit, how do you intend to use the funds that come in? I appreciate early days in terms of the level of inflows that you may get on that product, but is that money just going to sit in cash earning Fed funds? Just trying to figure out what the NII revenue impact could be tied to those deposits.
Dennis Coleman
Chief Financial Officer
Sure. Thanks, Ibrahim. So across the firm, we have multiple funding channels, multiple sources that we tap in our BAU activities. deposit channels that we also actively work with each and every day. We view this as one incremental and diversifying source. Deposits enable us to deepen our relationship with Apple, tap into their ecosystem, and the clients that we serve together who are card holders and want to sort of take advantage of the ease of moving into a deposit account. And we'll take those deposits along with all the other deposits in our portfolio and deploy it into the client franchise.
Katie
Conference Facilitator
That will conclude our question and answer session. I'd like to turn it back over to our speakers for any additional or closing remarks.
Carrie Halio
Head of Investor Relations and Chief Strategy Officer at Goldman Sachs
Yeah, thank you all for calling. We appreciate the time and interest in the firm. And if you have any additional questions, certainly feel free to call me or the rest of the investor relations team. Otherwise, we look forward to speaking with you soon. Thank you.
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