Goldman Sachs Group, Inc. (The)

Good morning. My name is Taryn, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs Third Quarter 2023 Earnings Conference Call. On behalf of Goldman Sachs, I will begin the call with the following disclaimer. The earnings presentation can be found on the Investor Relations page of our website and contains information on forward-looking statements and non-GAAP measures. This audio cast is copyrighted material of the Goldman Sachs Group, Inc., and may not be duplicated, reproduced, or rebroadcast without our consent. This call is being recorded today, October 17, 2023. I will now turn the call over to Chairman and Chief Executive Officer David Solomon and Chief Financial Officer Dennis Coleman. Thank you. Mr. Solomon, you may begin your conference.

Thank you very much, and good morning, everybody.

Thank you all for joining us. Before I start my prepared remarks, I'd just like to take a moment to address the horrific events in the Middle East. We condemn the terrorist attacks against Israel on the strongest possible terms and are heartbroken by the loss of so many innocent lives. This is clearly an extremely difficult and uncertain time for the region, and it's very concerning for many of us around the world. We obviously will continue to watch closely as this crisis unfolds. Earlier this month, I marked the end of my fifth year as the CEO of Goldman Sachs. I've never felt more optimistic about the firm and our strategy has never been more clear. We operate two core businesses, our market leading banking and markets franchise and our growing asset and wealth management platform, both of which are being positioned to deliver mid-teen returns through the cycle. As I reflect on the past five years, Much of what has always made Goldman Sachs extraordinary remains the same. Long track record of being a trusted advisor, the world's leading businesses, institutions, and individuals. A global broad and deep platform with capabilities that span across products, geographies, and solutions. An aspirational brand, exceptional people, and a culture of collaboration and excellence. Additionally, over this time, we have evolved the organization by institutionalizing a one Goldman Sachs operating ethos. This approach, coupled with our best-in-class talent, advice, and execution capabilities, has strengthened and solidified our leadership position across our businesses. As we sit here today, our client franchise is as strong as ever, enabling us to remain at the center of the most complex and important transactions for our clients. For example, the IPO market has started to reopen. Since Labor Day, there have been four marquee IPOs priced in the United States, Arm Holdings, Instacart, Clavio, and Birkenstock. Goldman Sachs was lead left on three of those four and the joint lead book runner on the fourth. No other bank can make that claim. Being entrusted to help companies navigate the critical transition of coming to market requires longstanding client relationships deep market expertise, and experience. Given the execution of these transactions, I'm encouraged by the prospect of a wider reopening of capital markets. If conditions remain conducive, I expect a continued recovery for both capital markets and strategic activity. As a leader in M&A advisory and equity underwriting, a resurgence in activity could be a tailwind for Goldman Sachs. In asset and wealth management, our strategy is working as evidenced by the successes we've seen across our franchise. While some active asset managers have faced quarterly outflows over the last few years, we posted our 23rd consecutive quarter of long-term fee-based inflows. We generated record management and other fees of $2.4 billion and are well on our way of achieving our $10 billion annual target for 2024. We are also ahead of pace on our $2 billion target for alternative management fees. While market-leading client franchise allows us to execute from a position of strength, we know we still have work ahead of us. Earlier this year at Investor Day, we laid out a clear set of goals to narrow our strategic focus, and we have made significant progress on these priorities. Most recently, we announced the sale of Green Sky. We also announced the sale of Personal Financial Management this summer. substantially all of our Marcus Loan portfolio. We have reduced our historical principal investments by $9 billion this year. We are confident that the work we're doing now provides us a stronger platform for 2024 and beyond. To assess the operating backdrop, the U.S. economy has proven to be more resilient than expected, though there are reasons to remain vigilant. Treasury rates have risen sharply over the past few months, with 10-year yields up 75 basis points in the third quarter. On top of that, recent inflation and employment data has come in above estimates, driving market expectations of higher for longer interest rates. And there still are a number of sectors in the economy that have yet to absorb the impact of higher rates, especially in light of the further tightening in financial conditions we've seen over the last quarter. At the same time, there has been an escalation of geopolitical stresses around the globe. The war in Ukraine, tensions with China, and now the conflict in the Middle East. Overall levels of risk are more elevated than we've seen in quite some time. While we don't know where this will all lead, it could impact economic growth and stability in the US and around the world. And we remain cautiously positioned. Before I turn it over to Dennis, I'd like to spend a moment about the three end game proposal and reiterate my views on it. We of course support sensible regulation and the desire to ensure we have a safe and sound financial system. There are some who've recently said we need to address the lessons from the 2008 financial crisis, which is driving the need for much higher regulations. But frankly speaking, the rules as proposed go way too far and do not account for the vast array of improvements made by the largest banks as a result of Dodd-Frank and other reforms. Not only have banks doubled capital over the last 15 years, they've improved the quality of capital, increased liquidity, simplified businesses, and have been subjected to ongoing annual stress tests. Requiring too much capital will have negative consequences. I believe if these rules are implemented, three things will happen. First, the cost of credit will go up for businesses of all size, from large corporations to small businesses. Second, more activity will move to the unregulated shadow banking sector. Policies that incentivize a transfer of risk outside the regulated banking system could, in fact, increase systemic risk. And third, US competitiveness will go down. Our capital markets are the deepest and the most liquid in the world. They're the engine of our economy. as access to capital allows for innovation and growth across the country. Our competitive standing as the leading global economy would be negatively impacted by this proposal. The net result of these proposed rules would be slower economic growth in the U.S., material improvement, and the same sound as the banking system. We, alongside clients and others in the industry, have been engaging heavily with our regulators and government stakeholders and given this engagement, We expect that there will be ongoing debate and ultimately changes to the proposed rules. Though regulatory uncertainty and geopolitical risks remain top of mind, I feel very confident about the state of our client franchise and the long-term opportunities for Goldman Sachs. We are focused on the execution of our strategy to further strengthen our leading global banking and markets franchise and grow our asset wealth management business. I feel good about the relative performance in our core business and we remain firmly committed to delivering for clients and shareholders. I will now turn it over to Dennis to cover financial results for the quarter.