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spk13: supported by $31 billion of long-term net inflows, largely from our OCIO business, representing our 26th consecutive quarter of long-term fee-based inflows. Turning to page seven on alternatives. Alternative AUS totaled $314 billion at the end of the second quarter, driving $548 million in management and other fees. Gross third-party fundraising was $22 billion for the quarter, and $36 billion for the first half of the year. In the second quarter, we further reduced our historical principal investment portfolio by $2.2 billion to $12.6 billion. On page nine, firm wide net interest income was $2.2 billion in the quarter, up sequentially from an increase in higher yielding assets and a shift towards non-interest bearing liabilities. Our total loan portfolio at quarter end was $184 billion. flat versus the prior quarter. For the second quarter, our provision for credit losses was $282 million, primarily driven by net charge-offs in our credit card portfolio and partially offset by a release of roughly $115 million related to our wholesale portfolio. Turning to expenses on page 10, total quarterly operating expenses were $8.5 billion. Our year-to-date compensation ratio net of provisions is 33.5%. Quarterly non-compensation expenses were $4.3 billion and included approximately 100 million of CIE impairments. Our effective tax rate for the first half of 2024 was 21.6%. For the full year, we continue to expect a tax rate of approximately 22%. Next, capital on slide 11. In the quarter, we returned $4.4 billion to shareholders. including common stock dividends of $929 million and common stock repurchases of $3.5 billion. Given our higher than expected SCB requirement, we plan to moderate buybacks versus the levels of the second quarter. We will dynamically deploy capital to support our client franchise while targeting a prudent buffer above our new requirement. Our board also approved a 9% increase in our quarterly dividend to $3 per share beginning in the third quarter. a reflection of our priority to pay our shareholders a sustainable growing dividend and our confidence in the increasing durability of our franchise. In conclusion, we generated solid returns for the first half of 2024, which reflects the strength of our interconnected businesses and the ongoing execution of our strategy. We made strong progress in growing our more durable revenue streams, including record first half revenues across FIC and equities financing, management and other fees, and private banking and lending. We remain confident in our ability to drive strong returns for shareholders while continuing to support our clients. With that, we'll now open up the line for questions.
spk07: Thank you. Please stand by as we assemble the Q&A roster. If you would like to ask a question during this time, simply press star, then the number one on your telephone keypad. If you would like to withdraw your question, please press star then 2 on your telephone keypad. If you're asking a question and you are on a hands-free unit or a speakerphone, we would like to ask that you use 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.
spk11: Hi there. Thanks very much. So I liked your forward-leaning comments on the IBC pipeline, and I think I heard you say the demand for committed acquisition financing is high. Does that infer anything about us being any closer to an inflection point in private equity-related M&A, sponsor-related M&A? And then how much of an advantage do you think you have as being maybe the only big bank that has a full-on private credit platform, obviously DCM platform and lending platform. Thank you.
spk12: Sure. Good morning, Glenn, and thanks for the question. You know, we're forward leaning in our comments because we definitely see, you know, momentum pick up. And I just, again, want to highlight something that was definitely my part of the script. And I think Dennis amplified, which we're still, despite the pickup, we're still operating at levels that are still significantly below um 10-year averages and so for example you know i think we've got kind of another 20 to go to get to 10-year averages on m a one of the reasons that m a activity one of the reasons not the only reason but one of the reasons why m a activity is running below those averages is because sponsor activity is just starting to accelerate and so i you know i think um especially given the environment that we're in that you're going to see over the next few quarters into 2025 kind of a reacceleration of that sponsor activity. We're seeing it in our dialogue with sponsors, and obviously it's been way, way below. The overall M&A activity has kind of another 20% to get to 10-year averages, but sponsor has been running below that, and we're starting to see that increase. Now, as that increases, I just think the firm's incredibly well-positioned, given the breadth of both Our leading position, you know, we've been top kind of one, two, three in what I'll call leveraged financed activity from a league table perspective and with the sponsor community. But we combine it with a very, very powerful direct lending private credit platform. And so I just think we're in a very, very interesting position. The size and the scope of the companies that are out there that have to be refinanced, recapitalized, sold, changed hands as sponsors continue to look. distribute proceeds to their limited partners, I think bodes well over the course of the next three to five years. Different environments, but the general trend will be more activity than we've seen the last two, two and a half years.
spk11: I appreciate that. Maybe one quickie follow-up on, you mentioned in the prepared remarks, in your printed prepared remarks, that real estate gains help drive the equity investment gains in the quarter. Can you talk about how material it was and what drove real estate gains during the quarter? Thanks.
spk13: Sure, Glenn. It's Dennis. I think the important takeaway from the year-over-year performance in the equity investment line is that in the prior year period, we actually had significant markdowns as we were sort of an early mover in addressing some of the commercial real estate risk across our balance sheet. And the results that reflect in this most recent quarter do not have the same degree of markdowns as in the prior period.
spk04: So that is, I think, a large explain of the delta.
spk05: Thank you. We'll take our next question from Ibrahim Poonawalla with Bank of America.
spk08: Good morning. I just wanted to spend some time on capital post the SCB increase. One, maybe just from a business standpoint, if you could update us whether the capital requirement changes anything in terms of how the firm has been leaning into the financing business. Do you need to moderate the appetite there or business as usual? So one, how does it impact the business? And second, Dennis, your comments are on buybacks moderating. Should we think more like 1Q levels of buybacks going forward? Thanks.
spk13: Sure, Ibrahim. So a couple of comments. I guess first important to observe that the level of capital that we're operating with at the moment is reasonably consistent where we've been over the last several years. So we feel that at that level of capital and with the cushion that we have heading into the third quarter, which at 90 basis points is at the wider end of our historical operating range, We have lots of capacity, both to continue to deploy into the client franchise, and with what we're seeing across the client franchise with backlog up significantly, there could be attractive opportunities for us to deploy into the client franchise, whether that's new acquisition financing, as David was referencing, or ongoing support of our clients across the financing businesses. We have the capacity to do that, as well as to continue to invest in return of capital to shareholders Given a $3.5 billion number in the second quarter, we thought it was advisable to indicate we would be moderating our repurchases. But we still do have capital flexibility. And based on what we see developed from the client franchise, we will make that assessment. We'll manage our capital to an appropriate buffer. But we're still certainly in a position to continue to return capital to shareholders.
spk08: Got it. So assume no change in terms of how we're thinking about the financing business. And just... separately in terms of sponsor-led activity. We waited all year for things to pick up. Is it a troubling sign that the sponsors are not able to monetize assets? Does it speak to inflated valuations that they're carrying these assets on? Just would love any context there, David, if you could. Thank you.
spk12: Sure. I mean, I appreciate that. I don't think it's troubling. I wouldn't use the word troubling. But I do think that There are places where sponsors hold assets and their ability to monetize them at the value that they currently hold them leads them to wait longer and keep the optionality to have that value compound. At the same point, there's pressure from LPs to continue to turn over funds, especially longer dated funds. And, you know, as they take that optionality to wait, the pressure just builds. And so I think we're starting to see a bit of an unlock and more of a forward perspective to start to move forward, accept evaluation parameters, and move forward. But I just think this is natural cycle, and you're going to see a pickup in that activity for sure. I'm just not smart enough to tell you, you know, exactly which quarter and how quickly, but we are going to go back to more normalized levels. Thank you.
spk07: Thank you. We'll go next to Betsy Gracek with Morgan Stanley.
spk05: Hi, good morning. Hi, can you hear me okay? Okay.
spk00: Sorry, I wasn't sure if you could hear me. All right. Well, thanks very much. I did just want to lean in on one question regarding how you're managing, you know, the expense line as we're going through this environment because, you know, we've had this very nice pickup in revenues and comp ratio is going up a little bit, but I'm just wondering is this a signaling to hold for the rest of this year, or is this just a one-off given that some of the puts and takes you mentioned on deal activity earlier on the call?
spk13: Sure, Betsy. So if you look at year-to-date change in our revenues net of provision, that is tracking ahead of the year-to-date change in our compensation and benefit expensed. We are sort of following the same protocol that we always do, which is making our best estimate for what, you know, we expect to pay on a full year basis and doing that in a manner that reflects the performance of the firm as well as the overall, you know, competitive market for talent. So, you know, based on what we see, we think this is the appropriate place to accrue compensation, but we'll obviously monitor that closely as the balance of the year evolves.
spk00: Okay, and as we anticipate a continued pickup here in M&A, given everything you mentioned earlier, I would think that that's positive operating leverage that should be coming your way. Would you agree with that, or do I have something wrong there? Thanks.
spk13: No, so we are certainly hopeful that the business will continue to perform and that we will you know, grow our revenues, you know, in line with what the current expectation is based on backlog. And, you know, we would love to generate incremental operating leverage if we perform in line with our expectations.
spk00: All right. Thank you.
spk07: We'll take our next question from Brennan Hawken with UBS.
spk09: Good morning. Thanks for taking my questions. You flagged, Dennis, the record financing revenue, which clearly shows momentum behind the business. And it would be my assumption that given rates have been more stable for quite some time now, it seems to reflect balance growth. So one, I want to confirm that that's fair. And could you help us understand how we should be thinking about rate sensitivity and as it seems as though maybe a few rate cuts might be on the horizon?
spk13: Thank you, Brendan. So, you know, we have been on a journey for several quarters and years in terms of committing ourselves to the growth of the more durable revenue streams within global banking and markets. We have our human capital and underwriting infrastructure set up in place. We have relationships with a large suite of clients that are frequent users of these products. The business is very diversified by sub-asset class, and it's a business that we are looking to grow on a disciplined basis. We've had an opportunity to deploy capital in a manner that is generating attractive risk-adjusted returns. That's something that we're going to remain mindful of. But we believe, given the breadth of that franchise, that we should be able to continue to support the secular growth that our clients are witnessing, even as various rate environments should moderate.
spk04: Okay.
spk09: And then next question is really sort of a follow-on from Betsy's line of questioning. So year to date, you've got a 64% efficiency ratio. You know, when we take a step back and think about your targets and aspirations for that metric and an environment, consider an environment that seems to be improving steadily, you know, how should we be thinking about margins on incremental revenue? You know, could you help us understand how revenue growth will continue to drive improvement in that efficiency ratio?
spk13: Sure. So, thank you for that question, and thank you for observing the improvement that we're seeing. Obviously, our year-to-date efficiency ratio at 63.8% is nearly 10 points better on a year-over-year basis. Still not at our target of 60%, but we are making progress. As we continue to grow our revenues, we should be able to deliver better and better efficiency. But ultimately, the type of revenues that we grow and the extent to which they attract, you know, variable or volume-based expenses is a contributing factor. But we do have visibility, for example, as we continue to move out of some of our CIE exposures that we should be able to reduce some of the operating expenses associated with that. And we do have a very granular process internally looking at each of our expense categories on a granular basis and trying to make structural improvements to drive efficiencies over time while we at the same time look to drive top line revenues.
spk05: Thank you. We'll go next to Mike Mayo with Wells Fargo Securities.
spk03: Hi. I'm just trying to reconcile all the positive comments with returns that are still quite below your target. I mean, you highlight Revenue growth in global banking markets and wealth and asset management. You have record financing for equities and FIC combined. You're number one in M&A. You have record management fees, record assets under supervision. Your efficiency has gone from 74% to 64%. Increase your dividend by 9% to signal your confidence. Your CET1 ratios, 90 basis points above even the higher Fed requirements. So everything you start, David, you start off the call saying the results are solid. But then you look at the returns and you say 11% ROE in the second quarter. That's not quite the 15% where you want it to be. So where's the disconnect from what you're generating in terms of returns and where you'd like to be?
spk12: Thanks. Thanks, Mike. Appreciate the question. Look, we're on a journey. And the way I look at it, our returns for the first half of the year are 12.8%. There are I, you know, I think there are a couple of things, you know, give gets in that, you know, one for sure, you know, we're still, we still have a little bit of drag from the enterprise platforms, which we're working through. And so that will come out. And I, you know, at some point as we work through that over the next 12 to 24 months, we'll continue to make progress on that. So the returns in the first half of the year would be a little higher exit. And then on top of that, as we've said repeatedly on the call and have given a bunch of information, we're still operating meaningfully below 10-year averages in terms of investment banking activity. And, you know, I think that'll come back. I obviously can't predict. But if you look at the returns of the firm, we have materially uplifted the returns of the firm, and we're going to, you know, continue to focus on that. Now, the next step to the puzzle is our continued progress in AWM. So, you know, you know and you can see the performance over the course of the last few years of global banking and markets, but we've said the AWM ROE is not where it needs to be. You heard our comments about the fact that we've got the margin up to 23%, but the ROE is still around 10%. We think we can continue to grow the business. As we've said, high single digits. We can continue to improve the margin and ultimately bring up that AWM ROE. And then you look across the firm and you have a stronger return profile.
spk06: So I think we're making good progress. We didn't say and have not worked to do for sure. but we feel good about the progress.
spk03: And I assume part of your expectation is a sort of multiplier effect when mergers really kick in. Can you just describe what that multiplier effect could potentially look like based on past cycles?
spk12: What I would say is one of the things that should be a tailwind for further momentum in our business is a return to you know, average levels. I'm not sitting here saying we're going to go back to periods of time where we went well above 10-year averages, but there's obviously, if we did get back to that period, and there will be some point in the future where we went above average, too, and not just below average, you know, we have a tailwind for that. But as a general matter, when there are more M&A transactions, whether with financial sponsors or big corporates, there is more financing attached to that. People need to raise capital to finance those transactions. They need to reposition balance sheets. They need to manage risks through structured transactions. And so there's a multiplier effect as those activities increase. We don't put a multiplier on it, but our whole ecosystem gets more active as transaction volumes increase on the M&A side.
spk03: And then lastly, for your returns, the denominator is a big factor. How does that work with the Fed? I know you can't say too much, and reasonable people can disagree, but your whole point is that you've de-risked the the balance sheet and the company, and then here we have the Fed saying that maybe you haven't done so. So how does this process work from here? Will we hear results about the SCB ahead, or is this something that's just behind closed doors?
spk12: Look, as a general matter, what I'd say, Mike, as a general matter, we're supporters of stress testing. We believe it's an important component of the Fed's mandate to really ensure the safety and soundness of the banking system. However, we've maintained for some time that there are elements of this process that may be distracting from these goals of safety and soundness. The stress test process, as you just highlighted, is opaque. It lacks transparency. It contributes to excess volatility in the stress capital buffer requirements, which obviously makes prudent capital management difficult for us and all of our peers. We don't believe that the results reflect the significant changes we've made in our business. They're not in line with our own calculations, despite the fact that the scenarios are consistent year over year. Now, despite all that, we've got the capital flexibility to serve our clients. We'll continue to work with that capital flexibility, and we'll also continue to engage around this process to ensure that over time we can drive the level of capital that we have to hold in our business mix down. But obviously, we have more work to do given this result.
spk04: All right, thank you.
spk07: We'll take our next question from Steven Chewbacca with Wolf Research.
spk04: Hi, good morning.
spk16: So I wanted to start off with a question just – just want to start with a question on the consumer platform fees. You know, they were down only modestly despite the absence of the Green Sky contribution. Just wanted to better understand what drove the resiliency in consumer revenues.
spk04: whether the quarterly run rate of 600 million is a reasonable jumping off point as we look at the next quarter.
spk13: So, Steve, thank you for the question. I mean, on a sequential basis, they're down, but that's because we have the absence of the green sky contribution. There actually is growth across the card portfolio. I think the, you've seen that the level of growth has slowed as we have sort of implemented several rounds of underwriting adjustments to the card originations. And so, our expectation is that on the forward, you know, the period over period growth should be more muted.
spk04: Understood. And maybe just one more clarifying question.
spk16: I know there's been a lot asked about the SEB, Really just wanted to better understand, Dennis, since you noted that you're running with 90 bits of cushion, which is actually above normal, just how you're handicapping the additional uncertainty related to Basel III endgame. There's certainly been some favorable momentum per the press reports and even some public comments from regulators. We just want to better understand, given the uncertainty around both the SEB and Basel III endgame, where you're comfortable running on a CET1 basis. over the near to medium term?
spk13: Sure. Thanks, and I appreciate that question. I think, obviously, there's been a lot of change. There's been some changes in expectations. I think in highlighting that we are operating at the wider end of our range, it is to signal flexibility, and certainly embedded in that is to address some of the uncertainty, which does remain with respect to Basel III Endgame, both the and timing of its resolution. It sounds from some of Powell's latest comments that that may not be something that comes into effect until perhaps into 2025. But we are sort of maintaining a level of cushion that I think is appropriate in light of what we know and what we don't know about the future opportunity set for Goldman Sachs. But that buffer is designed to support clients, return capital to shareholders, while maintaining a prudent buffer with some of the lingering uncertainty with respect to future regulatory input.
spk04: Helpful caller. Thanks for taking my questions. Thank you.
spk07: We'll go next to Devin Ryan with Citizens JMP.
spk15: Great. Good morning, David and Dennis. A couple questions on AWM progress. So the first one is on the alts business specifically, and you're tracking obviously well ahead of the fundraising targets relative to when you set the $1 billion median term target for annual incentive fees. And now with over 500 billion in alts AUM and obviously growing, that would seem pretty conservative. So I appreciate there's a lot of work to do to generate the returns ahead here, but how should we think about the underlying assumptions for incentive fees in a more normal harvesting environment, just given the mixed shift and the growth that you're seeing in AUM there?
spk13: So, Devin, I think it's a good question, and I think we share your expectation that that's going to be a more meaningful contributor on the forward. We laid it out as one of the building blocks at our investor day. The contribution coming through that line since then has been not as high as we expected. have modeled from an internal medium to longer-term perspective, we do give good disclosure that the balance of unrealized incentive fees at the end of the last quarter were $3.8 billion. So you can make various assumptions as to what the timing of the recognition of those fees are. They can obviously bounce around from time to time. It is a granular vehicle-by-vehicle buildup. But, you know, given the current outlook and status of those funds, that's our best expectation of what level of fees could be coming through that line over the next several years. So I think it is an important incremental contributor and should be, you know, should help the return profile of Asset and Wealth Management on the forward, couple that with the success that we're having with ongoing alts fundraising, and that will help to feed future investments and funds, which in turn, will generate some backlog of potential incentive fees above and beyond what's already in the unrealized disclosures.
spk15: Yeah. Okay. Thanks, Dennis. And then a follow-up, this is also kind of connected, but at a recent conference, you highlighted the margin profile of all the standalone businesses and asset and wealth management of public peers, so kind of as a comparison, and highlighted 35% plus for alts. And some of the public firms we know are obviously well above that. So I appreciate you're running the AWM segment as kind of one segment, but you know, if all does accelerate and, and, you know, we're looking at, you know, 60% of all it's AUM isn't even fee earning yet. What does that mean for segment margins relative to kind of that mid 20% target? Cause you're already at 23% thus far in 24. So just trying to think about the incremental margins coming from the acceleration and growth, particularly from the alt segment as well.
spk13: So that's a good question, Devin. I mean, it, it, It should be a significant unlock for us because despite the breadth and the longevity with which we've been running our ALTS businesses, there is significant opportunity for us to actually improve the margin profile of the ALTS activities in particular relative to the overall AWM margin, particularly as we develop incremental scale by strategy. And so, in addition to just overall growth in the segment, which should unlock margin improvements, actually within our portfolio of activities, the alts business, again, despite its current scale, presents a big opportunity for incremental margin contribution.
spk06: Great. Thank you.
spk05: We'll go next to Dan Fannin with Jefferies.
spk02: Thanks. Good morning. In terms of your on-ballot sheet investments, you continue to make progress in reducing that this quarter. Can you talk about the outlook for this year or any line of sight in terms of exits that we can think about?
spk13: Sure. Thank you. Obviously, an ongoing commitment of ours to move down those on-ballot sheet exposures, also part of the equity and capital story and returns in the segment. At $2.2 billion for the quarter, that was a decent reduction. We obviously have a target out there to sell down the vast majority of that balance, which is now at $12.6 billion by the end of next year. But our expectation is that we will continue to chip away at it across both the third and the fourth quarter of this year and then on into 2025. There's really no change on our commitment to sell down the vast majority of that by the end of next year.
spk02: Understood. And as a follow-up, just within asset and wealth, particularly on the alts, The fundraising target raised for the full year, given the success you've had, you know, the private credit fund closing here in the first half was big. Can you talk to some of the other strategies that have the potential to scale, as you mentioned earlier, and or maybe are a little bit smaller that have, you know, really large or increasing momentum as you think about second half, but also as we even into next year?
spk13: Sure. So, you know, obviously, taking a step back, you're talking about the targets that we set. You know, once upon a time, it was $150 billion. We moved it to $225. It's now at $287 billion. And with $36 billion raised through the first half and us expecting to surpass $50 billion, that means we should be north of $300 billion by the end of this year. And I think one of the things that we find attractive about our platform is that we have opportunities to scale across multiple asset classes within alternatives, equity, credit, real estate, infrastructure. We had notable fundraisings in private credit and real estate this quarter, but you could see contribution from other strategies like equity on the forward and a number of different strategies, both by asset class and by region. So we think we have a diversified opportunity set to continue to scale the alts platform.
spk05: Thank you. We'll go next to Matt O'Connor with Deutsche Bank.
spk14: Good morning. I was wondering if you could just elaborate a bit on the competitive landscape, specifically in banking and markets. I know it's always competitive, but some of the really big bank peers are leaning in who haven't been a few years ago. And all these regional banks that I cover are also realizing that they need broader cap and market capabilities. So you're obviously an industry leader in a lot of the areas across banking and markets and just wondering, how you're seeing kind of the competition impact you at this point?
spk12: Sure, Matt. I appreciate the question. I just say, you know, investment banking and, you know, the markets business, the trading business, they've always been competitive businesses. I think our integrated 1GS approach is a very, very competitive offering. I mean, we can have debates, but it's, I think, one of the top two offerings, you know, out there, depending on how you look at it, what you look at. There's always going to be competition. There are always going to be people that come in and make investments in niche areas. But broadly speaking, you know, we've had leading M&A share for 25 years. We have leading share in capital raising for, you know, an equivalent period of time. We've continued to invest in our debt franchises over the last, you know, more than decade. And our trading businesses and our ability to intermediate risk, I think, have been second to none or viewed as second to none. for a long, long time. And so the combination of our focus on serving our clients, making sure we're giving them the right resources, both human capital and financial capital, to accomplish what they need to accomplish, the fact that we have global scale positions is very well. We'll always be competitors, but I like where our franchise sits, and I don't see any reason why we shouldn't be able to continue to invest in it, strengthen it, and continue to have it operating as a leader in what's always been and will continue to be a very competitive business.
spk14: Okay, that's helpful and agreed. And then just separately, I hate to ask you about activity levels and stuff like that since the debate three, four weeks ago, but maybe I'll frame it. From your experience in presidential election periods like this, where there's maybe just more uncertainty than normal, how do both institutional and corporate clients react? Do they kind of say, well, let's wait and see the other side? Is it just noise because we've been going through it for some time here?
spk04: But what are your thoughts on that? Thank you.
spk12: There are always exogenous factors that affect, you know, corporate activity and institutional client activity. You know, I don't have a crystal ball, so I can't see what the next, you know, 100 days leading up to our election will bring. But, you know, I think we're well positioned to serve our clients.
spk06: Regardless of the environment, clients are very active at the moment, and I think they're probably going to continue to be active. Thank you.
spk07: We'll take our next question from Gerard Cassidy with RBC.
spk01: Thank you. Good morning, David. Good morning, Dennis. David, you said in your opening comments that you – You took the board out to Silicon Valley and you were impressed with the artificial intelligence and what we could expect in the future and the opportunities for Goldman to be able to finance some of the infrastructure needs that may come of that. Can you share with us the artificial intelligence that you guys are implementing within Goldman and how it's making you more productive, generating maybe greater revenues or even making it more efficient?
spk12: Sure. I mean, at a high level, Gerard, we, as most companies around the world, are focused on how you can create use cases that increase your productivity. And if you think about our business as a professional service firm and a people business where we have lots of very, very highly productive people creating tools that allow them to focus their productivity on things that advance their ability to serve clients, or interactive markets is a very, very powerful tool. So if you look and you think across the scale of our business, I think you can think of lots of places where the capacity to use these tools to take work that's always been done on a more manual basis and allow the very smart people to do that work to focus their attention on clients are quite obvious. You can look at it in an area like the equity research area as every quarter, you're all analysts on the phone, there's lots of ways that these tools can leverage your capacity to spend more time with clients. You think about our investment banking business and the ability in our investment banking business to have what I'll call the factory of the business, prepare information, thoughtful information for clients, the revolution there. When you look at the data sets we have across the firm and our ability to get data and information to clients so that they can make better decisions around the way they position in markets, that's another obvious use case. For our engineering stack, and we have close to 11,000 engineers inside the firm, the ability to increase their coding productivity is meaningful. So those are a handful. There are others. We have a broad group of people that are very focused on this. But again, I'd step back. Well, this will increase our productivity. The thing that we're most excited about is all businesses are looking at these things and are looking at ways that it adapts and changes their business. And that will create more activity and a tailwind broadly for our businesses. People will need to make investment. They'll need financing. They'll need to scale. And so we're excited about that broad opportunity.
spk01: Very good. And as a follow-up, Dennis, you talked about credit, and it was impressive that you didn't have any charge-offs in the wholesale book. Can you give us some color on what you're seeing there? It seems like there must be some improvement since, obviously, you didn't have any charge-offs in the wholesale book.
spk13: Sure. Thanks, Gerard. As you observe, the charge-off rate for us in the wholesale is approximately 0%. What we did see in this quarter, you know, was release. And we've been able to improve some of our models and be able as a consequence to release some of the provisions in the wholesale segment. So while that was a contributing benefit to sort of call it the net PCL of the quarter with consumer charge offs offset by that wholesale release, that's not necessarily something that we would expect to repeat each quarter in the future. And although we manage our credit and our wholesale risk very, very diligently and consistently, it is more likely the case that we will have some degree of impairments given our size and scale and representation in the business. But we're pleased that the overall credit performance in terms of charge offs is about 0%. Thank you.
spk07: We'll go next to Saul Martinez with HSBC.
spk10: Hi, good morning. Thanks for taking my question. Just to follow up on capital, I mean, it certainly is encouraging that your CET1 ratio rose 20 bps in a quarter where you bought back $3.5 billion of stock. And you did have, I think, a $16 billion reduction in RWA as your presentation talks about credit RWAs falling this quarter. I guess, can you just give a little bit more color on what drove that reduction? And I guess more importantly, Is there continued room for RWA optimization from here to help manage your capital levels?
spk13: Sure. Thanks, all. I appreciate that question. You know, capital optimization, RWA optimization is something that we've been, you know, committed to for a very long period of time. On the quarter, there were reductions both in credit and market risk RWAs. You know, drivers included, you know, less derivative exposure, reduced equity investment exposure. and in some places lower levels of volatility. You know, we try to get the right balance between deploying on behalf of client activity as well as being efficient and rotating out of, you know, less productive activities or, you know, following through on our strategic plan to narrow focus and reduce balance sheet exposure. So that is something that, you know, was contributed to quarter-over-quarter benefit despite the buyback activity we executed, and it's something we'll remain, you know, very focused on just given the the multiplicity of binding constraints that we operate under.
spk10: Thank you. That's helpful. And maybe a follow-up on financing, you know, FIC financing up 37% equities. Equity financing is now something, you know, close to 45% of all of your equity sales and trading revenues. I guess how much more room is there, or how should we think about sort of the size of the opportunity set to continue to grow from here? How much more space is there to use financing as a mechanism to help deepen penetration with your top institutional clients?
spk13: It's a good question, Saul. I think on the FIC financing side, as I indicated, we do think that we are helping clients participate in the overall level of growth that they're seeing in their businesses. And, you know, we think based on what we see currently that we can calibrate the extent of our growth based largely on how we assess the, you know, risk return opportunity set across the crime portfolio. So we're being disciplined with respect to our growth, but trying also to support clients in their growth and drive a more durable, you know, characteristic across the GBM business. In equities, the activity and the balances, et cetera, obviously have benefited from equity market inflation over the course of the year. But it's also an activity that we remain committed to in terms of supporting clients. And clients look to us on a holistic basis, really across both FIC and equities, to ensure that across all of the activities they're doing with us, that we're finding some balance between helping them through financing activities, helping them with intermediation, helping them with human capital. Both of those activities are part of more interconnected activities with clients and something that we remain very focused on and think we can continue to grow.
spk04: Great. Thank you.
spk07: Thank you. At this time, there are no additional questions in queue. Ladies and gentlemen, this concludes the Goldman Sachs second quarter 2024 earnings conference call. Thank you for your participation. You may now disconnect.
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