Goldman Sachs Group, Inc. (The)

Good morning. My name is Katie, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs third quarter 2025 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 the Goldman Sachs 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 consent. This call is being recorded today, October 14th, 2025. 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, Operator, and good morning, everyone. Thank you all for joining us. We delivered very strong results in the third quarter. and generated net revenues of $15.2 billion, earnings per share of $12.25, an ROE of 14.2%, resulting in an ROE of 14.6% and an ROE of 15.6% for the year to date. This performance reflects the strength of our market-leading franchises, where we continue to harness the power of one golden sacks to serve our clients with excellence. In investment banking, we've seen increased momentum, in our number one M&A franchise as clients turn to us for their most consequential transactions. Recently, we hit the milestone of advising on over $1 trillion in announced M&A volumes for 2025 year-to-date. This is $220 billion ahead of our next closest competitor and underscores our dominant position as the advisor of choice for clients. We've built this leadership position through decades of investment in our dedicated teams across the globe. This allows us to advise our clients on their most important transactions. We were the exclusive advisor to Electronic Arts in its $55 billion sale to a consortium comprised of the Public Investment Fund of Saudi Arabia, Silver Lake, and Affinity Partners. We were also the lead advisor to Baker Hughes on its strategic acquisition of Chart Industries for $14 billion and advised and provided financing to Telma Bravo for its $12 billion leverage buyout of Dayforce. Importantly, Given our one golden tax operating approach, increased M&A activity creates a real multiplier effect. Whether it's bridge financing, derivative hedging, or investment opportunities for asset wealth management clients, our advisory relationships are often the genesis for client activities across the firm. Looking forward, it's important to recognize the tailwinds behind our optimistic outlook for investment banking. We're encouraged by the steady building sponsor activity, which is now tracking 40% higher versus last year. And considering that sponsors have over $1 trillion of dry powder and $4 trillion of private equity assets in their portfolios, coupled with the expected rate cuts in the U.S., the setup remains constructive. For corporates, it's clear from our conversations in boardrooms that after a period of heightened uncertainty and volatility early in the year, many of our clients have navigated and adapted to the current state of play. Though near-term policy considerations are still relevant, Many CEOs have shifted their focus back to long-term and strategic decision-making, particularly amid a more supportive regulatory environment. Scale and investing for growth remain paramount, especially in the context of harnessing AI capabilities. In addition to a robust investment banking backdrop, we have seen continued strength across our leading FIC and equities businesses, which in total rose on a year-over-year basis for the seventh consecutive quarter. Much of the momentum from the first half of the year persisted through the summer and into September, contributing to our record year-to-date performance for equities and notable strength in our rates business within FIC. All in, our markets businesses continue to demonstrate resilience that comes from having a global, broad, and deep franchise. Taking a step back, there is no question that there is a fair amount of investor exuberance at the moment, with US equity markets consistently hitting record highs over the last several months. Much of this has been fueled by a tremendous amount of investment in AI infrastructure, which has driven significant capital formation. But as students of history, we know the following periods of broad-based excitement around new technologies, there will ultimately be a divergence where some ventures thrive and others falter. While I feel good about the forward outlook on balance, the market operates in cycles. and disciplined risk management is imperative. We are especially vigilant in times like these to proactively manage risks as we continue to serve clients with our best-in-class execution capabilities and insights. In asset and wealth management, we are relentlessly driving forward our growth strategy. Assets under supervision rose to a record $3.5 trillion. We again delivered record results across our more durable revenues in management and other fees in private banking and lending. In alternatives, we raised a record 33 billion in the quarter. As a result, we now expect to raise approximately 100 billion in alternatives this year, substantially exceeding our prior full-year fundraising expectations. In wealth, client assets rose to a record 1.8 trillion as we continue to grow our advisor footprint and expand our suite of client offerings. It is clear that we've been making very strong progress in enhancing our business mix by growing our more durable revenues at AWM. We are also accelerating our growth via innovative partnerships and acquisitions. Yesterday, we announced the acquisition of Industry Venture, a leading venture capital platform with a track record of strong investment performance and the proven ability to invest across all stages of the VC lifecycle. This transaction complements our market-leading secondaries investing franchise. We have been a pioneer for over 25 years and has a highly attractive technology investment capability to the platform. This business will fit in our external investing group or XIG, which has over 450 billion in assets under supervision across asset classes and is a market leader in investing in alternative manager strategies, secondaries, co-investments, and GP stakes. Importantly, facilitated by our one Goldman Sachs approach, Industry Venture's deep relationships across the VC ecosystem have the potential to drive new opportunities for the firm, particularly in investment banking and wealth management. Additionally, last month, we announced a strategic collaboration with T. Rowe Price to deliver a range of public and private market solutions designed for the unique needs of retirement and wealth investors. We are thrilled to partner with T. Rowe, which, like Goldman Sachs, has a strong brand with a long track record of success across investing in capital markets, and in producing strong investment returns for clients. With our 30 years of experience in private markets and an ability to blend asset classes to address outcome-oriented objectives, we can help bridge the gap between growth opportunities in private markets and the needs of individual investors. As we drive growth across our businesses, operating efficiency remains one of our key strategic objectives. Although we review our operations on an ongoing basis, It is also important to make long-term decisions that best position the firm for the future, especially as rapidly accelerating advancements in technology present significant opportunities. To this end, earlier this morning, we announced to our people the launch of one Goldman Sachs 3.0. Propelled by AI, this is a new, more centralized operating model that we expect to drive efficiencies and create capacity for future growth. This is a multi-year effort that we will build over time, and we plan to measure our progress across six goals. Enhancing client experience, improving profitability, driving productivity and efficiency, strengthening resilience and capacity to scale, enriching the employee experience, and bolstering risk management. To start, we are drilling in on a handful of front-to-back work streams that can significantly benefit from AI-driven process reengineering, and will help inform our longer-term approach. These include priorities such as sales enablement and client onboarding that directly impact the client experience, as well as other critical areas that have touch points across the firm. For example, our lending processes, regulatory reporting, and vendor management. We've been successful by not just adapting to change, but anticipating it. And evolving the firm's operating model is part of the long-term discipline that our people, clients, and shareholders We will provide you with an update with additional details on our call in January. While we've made significant progress on our strategic priorities, we will continue to execute. The foundation we've laid to grow and strengthen the firm, coupled with our market-leading franchises and best-in-class talent, give me confidence in our ability to deliver for clients and drive strong performance for shareholders. I will now turn it over to Dennis to cover our financial results for the quarter.

Thank you, David. Good morning. Let's start with our results on page one of the presentation. In the third quarter, we generated net revenues of $15.2 billion, earnings per share of $12.25, an ROE of 14.2%, and an ROTE of 15.2%. Let's turn to performance by segment starting on page three. Lowell Banking and Markets produced revenues of $10.1 billion in the quarter, with an ROE for the year-to-date of 17%. Turn to page four. Advisory revenues of $1.4 billion were very strong, up 60% versus a year ago, reflecting a significant increase in completions in the quarter. Year-to-date, we remain number one in the league tables for announced and completed M&A, not only globally, but in each of the Americas, EMEA, and APAC. Equity underwriting revenues of $465 million were up 21% year-over-year on significant pickup and IPO activity. As we priced some of the most highly anticipated IPOs, including Klarna, Figma, and Figure Technologies. More broadly, we're pleased to see the broad-based recovery in the IPO market pick up steam. Debt underwriting revenues of $788 million rose 30%, primarily reflecting higher leverage finance activity. While acquisition-related activity is picking up amid more deal announcements, there is more room to run, which plays to our strengths as a firm. Year-to-date, we rank second in high-yield debt underwriting and leverage lending. Across investment banking, we continue to see strong momentum with our quarter end backlog at its highest level in three years, despite very strong accruals. Thick net revenues were $3.5 billion in the quarter, up 17% year over year. Intermediation results were driven by improved performance in rates, mortgages, and commodities, partially offset by lower results in currencies and credit products. Thick financing revenues of $1 billion were driven by strong results in mortgages and structured lending, Equities net revenues were 3.7 billion in the quarter. Equities intermediation revenues of $2 billion fell 9% year over year, driven by lower revenues and cash products, partially offset by better performance and derivatives. Record equities financing revenues of $1.7 billion were 33% higher year over year, amid record average prime balances for the quarter. Total financing revenues of $2.8 billion rose 23% versus the prior year. As we continue to deploy resources to grow FIC financing, and bolster our leading position in equities financing while maintaining a keen eye on risk management. These revenues comprise nearly 40% of overall FIC and equities revenues. Let's turn to page five. Asset and wealth management revenues in the quarter were $4.4 billion. Management and other fees were up 12% year over year to a record $2.9 billion on higher average assets under supervision. Private banking and lending revenues were $1.1 billion. Excluding the payment of interest on a previously impaired loan, year-to-date revenues were up in the high single digits year-over-year, driven by higher net interest income from lending to our ultra-high network clients. In aggregate, our revenues across management and other fees and private banking and lending total a record $4 billion in the quarter and $11 billion for the year-to-date. We continue to expect growth in the high single digits on an annual basis over the medium term. In the AWM segment, we generated a 23% pre-tax margin and a 10.5% ROE for the year to date. Excluding the impact of HPI and its $3.6 billion of average attributed equity, our pre-tax margin and ROE would have been approximately 150 and 250 basis points higher, respectively. Now moving to page six. Total assets under supervision ended the quarter at a record $3.5 trillion, up sequentially on $80 billion of net market appreciation, as well as $56 billion of long-term net inflows across asset classes, representing our 31st consecutive quarter of long-term fee-based net inflows. Turning to page seven on alternatives. Alternative assets under supervision totaled $374 billion at the end of the third quarter, driving $597 million in management and other fees. Gross third-party alternatives fundraising was a record $33 billion in the quarter. driven by demand across strategies, including private equity and credit, bringing year-to-date fundraising to $70 billion. On page nine, firm-wide net interest income was $3.9 billion in the third quarter. Our total loan portfolio at quarter-end is $222 billion, up modestly versus the second quarter. Our provision for credit losses of $339 million primarily reflected net charge-offs in our credit card portfolio. Turning to expenses on page 10, Total quarterly operating expenses were $9.5 billion. Our year-to-date compensation ratio net of provisions is 32.5% and represents our best estimate for the full year, inclusive of higher severance costs. 100 basis point improvement year-over-year reflects stronger revenue performance. Quarterly non-compensation expenses of $4.8 billion rose 14% year-over-year, driven by higher transaction-based costs, as well as charitable giving and higher litigation expenses. Our effective tax rate for the year to date was 21.5%. For the full year, we continue to expect a tax rate of approximately 22%. Next, capital on slide 11. In the quarter, we returned $3.3 billion to shareholders, including common stock dividends of $1.3 billion and common stock repurchases of $2 billion. Our common equity tier one ratio was 14.4% at the end of the third quarter under the standardized approach. In the current regulatory framework, our C21 requirement is 10.9%. So the NPR and CCAR averaging is still outstanding. In conclusion, given the continued execution on our strategic objectives, our market positioning, and the improving operating environment, we are confident in the outlook for our businesses. We are the number one M&A advisor globally, well-positioned to capitalize on the upswing in investment banking activity, which we expect the next 12 to 24 months. We're delivering on our growth strategy to drive more durable revenues across AWM, We are focused on efficiency and leveraging AI to meaningfully transform the firm. And this is all in the context of improving regulatory backdrop, which should allow us to be on offense as we deploy resources and service of our clients. Altogether, we remain confident in our ability to continue to deliver for shareholders. With that, we'll now open up the line for questions.