Goldman Sachs Group, Inc. (The)

Good morning. My name is Katie, and I'll be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs fourth 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, January 15th, 2026. 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, Operator. Good morning, everyone. Thank you all for joining us. I'm very pleased with our strong performance in the fourth quarter. We regenerated earnings per share of $14.01, an ROE of 16%, and an ROTE of 17.1%. For the full year, we delivered earnings per share of $51.32, a 27% increase versus last year, an ROE of 15% and ROTE of 16%. Before we review our financials in detail, I want to discuss our longer-term performance and provide an update to you on our strategy. Beginning on page one, In 2020, we held the firm's first investor day and laid out a clear and comprehensive strategy to grow and strengthen the firm. We also set a number of targets so we would be held accountable for our progress. Since then, guided by our purpose to be the most exceptional financial institution in the world, supported by our four values of client service, integrity, partnership, and excellence, we continue to successfully execute on this strategy. We increased firm-wide revenues by roughly 60%. We grew EPS by 144%. We improved our returns by 500 basis points. And we delivered a total shareholder return of over 340%, the most of our peer group over this timeframe. As you can see on page two, we achieved this while also materially improving the risk profile of the firm and enhancing the resilience of our earnings. we have doubled our more durable revenues. We have reduced historical principal investments by over 90% from roughly 64 billion down to 6 billion. The results of these multi-year efforts to scale capital light businesses and reduce our capital intensity were reflected in our most recent CCAR stress test, where we've driven a 320 basis point improvement in our stress capital buffer. All in, we have strengthened and grown the firm to a relentless focus on delivering excellence to our clients. Turning to page three, I want to highlight our strong execution in 2025. Our success is fueled by our world-class interconnected franchises that deliver one golden fax to our clients around the globe. In global banking and markets, we maintained our position as the number one M&A advisor in investment banking and number one equities franchise alongside our leading position in FIC. We improved our standing with the top 150 clients in these businesses, which has contributed to 350 basis points of wallet share gain in GBM since 2019. We significantly increased our more durable FIC and equities financing revenues, which grew to a new record of $11.4 billion for the year and generated returns in excess of 16% in the segment. In asset and wealth management, we are a top five active asset manager, a leading alternatives franchise, and a premier ultra high net worth wealth manager. We've consistently grown more durable management, other fees, and private banking and lending revenues, which were both records in 2025, and also raised a record 115 billion in alternatives. Our strong execution has led to improvement in both the margins and the returns in this segment. we're taking the final steps needed to narrow our strategic focus. In addition to completing the transition of the General Motors credit card program last August, last week we announced an agreement to transition the Apple Card portfolio. Let's turn to page four for a deeper dive on our franchises, starting with investment banking, where we have been the number one M&A advisor for 23 consecutive years. Very few, if any, service businesses of our size can claim longstanding leadership to this degree. This is a reflection of the strength of our client relationships, as well as the quality of our people and the advice and execution capabilities they bring to our clients. Since 2020, we've generated an incremental $5 billion in advisory revenues versus the number two competitor. And in 2025 alone, we've advised on more than 1.6 trillion of announced M&A transaction volumes over $250 billion ahead of the next closest peer. Over the last year, we've seen high levels of client engagement across our investment banking franchise, and we expect activity to accelerate in 2026. Our outlook is supported by a number of catalysts. Corporate focus on strategically positioning scale and innovation. The tremendous public and private capital fueling growth in AI. as well as a strong pickup in sponsor activity. Given our best-in-class sponsor franchise, we are especially well-positioned to help sponsors deploy the $1 trillion of dry powder they hold and monetize the roughly $4 trillion of value across their portfolio companies. Increased levels of engagement are reflected in our backlog, which stands at its highest level in four years. M&A transactions often kick off a flywheel of activity across our entire franchise. Whether it's acquisition financing, hedging activity, secondary market making, or investing opportunities for our AWM clients, it is unquestionable that there is a significant multiplier effect. And as the number one advisor for over two decades, we are uniquely positioned to capture the significant forward opportunity. Moving to page five, another growth engine for GBM has been our leading origination and financing businesses. Last year, we announced the creation of the Capital Solutions Group. formalizing a hub to provide our clients a comprehensive suite of financing, origination, structuring, and risk management offerings across both public and private markets. On the public side, we are optimistic about the outlook for equity and debt underwriting, particularly amid the resurgence in the IPO market and a higher acquisition finance-related activity. We have a longstanding track record and leading market positions. On the private side, our ability to structure holistic solutions has led to a number of asset-backed financings across infrastructure, transportation, and data centers, supported by strong origination and structuring that feed opportunities across our client franchise and our asset management platform. These capabilities have supported our deliberate strategy to grow our more durable financing revenues, providing a ballast to our results in comprising 37% total SIC and equity revenues in 2025. Since 2021, these have increased at a 17% tagger. And with risk management always top of mind, we still expect to prudently drive growth from here. On page six, we illustrate the strength and resilience of the FIC and equities intermediation businesses. We have demonstrated where we have a demonstrated ability to deliver strong results in a broad array of market environments. While client activity levels in different asset classes ebb and flow in any given quarter, our overall results have been remarkably consistent over time. This reflects the breadth and diversification of these businesses, which have been bolstered by our share gains. We see even more opportunities to further strengthen our franchise. This includes investing to improve our market-making capabilities and broaden offerings for active and passive ETF issuers. In addition, we are working to close share gaps with key client segments, including insurers, wealth managers, and RIAs, as well as in certain product areas like corporate derivatives. Geographically, we are looking to close the share gap in Asia in part by focusing on these areas. Turning to page seven, our scaled asset and wealth management business has $3.6 trillion in assets under supervision with global breadth and depth across products and solutions. We've grown more durable revenues across management and other fees in private banking and lending, at a 12% CAGR ahead of our target, and we continue to see significant opportunities across wealth management, alternatives, and solutions. We have also improved our AWM margins and returns, and given our growth outlook across these businesses, we are setting new targets. We are increasing our pre-tax margin target to 30%, which will help drive IT returns in AWM over the medium term. Let's dive deeper into our key growth opportunities, starting with wealth management on page eight. Over the last 50 years, we have built a premier franchise with $1.9 trillion in client assets that is centered around meeting the distinct investing, planning, and borrowing needs of the ultra-high net worth individuals, family offices, endowments, and foundations. Over the last five years, we drove long-term fee-based inflows at an annual pace of 6% and grew wealth management revenues at a tagger of 11%. And we expect further growth from here. Specifically, we are broadening our client base by increasing the number of advisors and content specialists globally. We are expanding our loan product offerings in line with client demand. We are enhancing alternatives investment offerings to facilitate clients moving closer to their optimal target allocation and continuing we are continuing elevating the overall client experience, including via enhanced digital offerings and more expansive thought leadership engagements that lever the convening power of Goldman Sachs. To sharpen our focus on future growth and wealth management, we are introducing a new target of 5% long-term fee-based net inflows annually across the platform. On page 9, we highlight our other key growth opportunities in asset and wealth management. Alternatives and solutions. We have a leading alternatives platform where we've raised $438 billion since our 2020 investor day. And we have grown alternatives management and other fees to a record 2.4 billion. We continue to scale our flagship fund program while concurrently developing new strategies. Given our success in strengthening and growing our alternative platforms, We believe we can raise between $75 and $100 billion annually on a sustainable basis. As these funds continue to be deployed, we expect double-digit growth in alternative management and other fees. We expect fee-paying alternative assets under supervision to reach $750 billion by 2030. This further supports our existing target of generating $1 billion in incentive fees annually. We are also pleased with the progress across our solutions business, where we see secular growth in demand for our products and services. We are the number one outsourced CIO manager in the U.S., providing clients a one-stop shop for their investment needs, advice, portfolio construction, risk management, and hedging. And we've run significant global mandates this year from firms, including Eli Lilly and Shell. We are also the number one separately managed account platform and the second largest insurance solutions provider. Looking forward, we see continued opportunities for growth, including in third-party wealth in the context of alternatives offering, ETFs, and customized solutions like direct indexing. In addition, we are expanding our capabilities in the retirement channel via partnerships, further deepening our strong relationships with insurers and enhancing our offerings for institutional clients, including sovereign wealth funds. Turning to page 10, building on our strong organic growth, we are accelerating our growth trajectory in asset wealth management through our recent strategic partnerships and acquisitions. Our collaboration with T. Rowe Price will deliver a range of public and private market solutions for retirement and wealth investors. Last month, we announced the launch of co-branded model portfolios the first of four planned product offerings. We recently closed the acquisition of Industry Venture, a venture capital platform that adds an attractive technology investment capability to our market-leading secondaries investing franchise, XIG, where we now have over $500 billion in assets under supervision. And most recently, we announced the acquisition of Innovator, which significantly scales our businesses to be in the top 10 of active ETF providers globally, particularly in the fast-growing outcome-based ETF segment. While the bar for transformational M&A remains very high, we will continue to look for ways to accelerate growth in asset and wealth management. Turning to page 11, we have a long history of prudent and dynamic capital management, and our philosophy remains unchanged. We prioritize investing across our client franchises at attractive returns, sustainably growing our dividends, and returning excess capital to shareholders in the form of buybacks. We see meaningful opportunities to deploy capital across our franchise. This includes leaning into acquisition financing as M&A activity accelerates, supporting growth in equities and fixed financing, and increasing lending to our ultra-high net worth clients. That said, given our strong earnings generation capability and excess capital positions, we also have capacity to return more capital to shareholders. Today, we are announcing a 50-cent increase in our quarterly dividend to $4.50, representing a 50% increase from a year ago. In addition, we have $32 billion of remaining buyback capacity under our current share repurchase authorization. And while we are mindful of our current stock price, we will remain dynamic in executing repurchases. Turning to page 12, as we continue to grow the firm and strategically deploy our balance sheet to support client activity, Our unwavering focus remains on maintaining a disciplined risk management framework and robust standards. We've been on a multi-year journey to diversify our funding footprint, including building strategic deposit-raising channels such as private banking, markets, and transaction banking. This has significantly improved our funding structure. Our deposits have grown to $501 billion and now represent roughly 40% of our total funding. We continue to optimize activity in our bank equity. which held 35% of firm-wide assets at year-end versus 25% at the time of our first investor day. Overall, this progress underscores our commitment to the diversification and resiliency of our funding profile, which has improved our funding costs and our financial flexibility. All in, our robust capital position, diversified funding mix, dynamic liquidity management, and strong risk discipline are foundational to the strength and stability of our balance sheet allowing us to meet the evolving demands of our clients. Moving to page 13. Last quarter, we announced the One Goldman Sachs 3.0. We announced the launch of One Goldman Sachs 3.0, our new operating model propelled by AI. We are excited to embark on this effort, starting with six work streams we identified as ripe for disruption. Our people have begun thorough assessments of opportunities for efficiency, and we will then invest to re-engineer these processes from the ground up. We will be measuring and driving accountability, and we will update you over the coming year with additional details regarding these metrics. Let's turn to page 14. The exceptional service we provide our clients is a direct result of our people, who are our most important asset. Our client franchise is powered by our best-in-class talent and culture, and it is critical that we continue to invest in them. Goldman Sachs is an aspirational brand around the globe, which allows us to attract quality talent at all levels. As an example, in 2025, we had over 1.1 million experienced tire applications, a 33% increase from last year. And in our summer internship program, we maintained a selection rate of less than 1%. Many of these individuals will have long careers at the firm, exemplified by the fact that roughly 45% of our partners started as campus hires. And while some leave for opportunities elsewhere, these firms often become important clients to Goldman Sachs. Today, more than 650 of our alumni are in C-suite roles at companies with either a market cap greater than $1 billion or assets under management greater than $5 billion. On page 15, we outline our firm-wide through-the-cycle targets. Given the successful execution against our strategic priorities, we are confident that we will continue to deliver on these, and in the near term, we believe they are a catalyst that position us to exceed our return targets. We are the number one M&A advisor within our leading global banking and markets franchise that is poised to capitalize on a cyclical upswing in investment banking activity. A scaled asset and wealth management business with higher margin and return targets and clear opportunities for future growth, and tailwinds from a more balanced regulatory regime. In closing, I am incredibly proud of what we have delivered, and I'm confident that we will continue to serve our clients with excellence and drive strong returns for our shareholders. Let me now turn it over to Dennis to cover our financial results in more detail.

Thank you, David, and good morning. Let's start with our results on page 16 of the presentation. In the fourth quarter, we generated revenues of $13.5 billion, earnings per share of $14.01, an ROE of 16%, and an ROTE of 17.1%. For the full year, we delivered earnings per share of $51.32, a 27% increase versus last year, an ROE of 15% and an ROTE of 16%, improving 230% and 250 basis points, respectively, compared to 2024. As David mentioned, we announced an agreement to transition the Apple Card portfolio. For the quarter, the transition had a net positive impact of 46 cents to EPS and 50 basis points to ROE, as a $2.3 billion revenue reduction was more than offset by a $2.5 billion reserve release upon moving the portfolio to held for sale. Given that we are taking our final steps to narrow our strategic focus, you will have seen we implemented minor organizational changes and made corresponding updates to our segments, which are incorporated in our earnings presentation today. Turning to results by segment. Starting on page 18, global banking and markets produced record revenues of $41.5 billion for the year. up 18% amid broad-based strength versus last year. In the fourth quarter, investment banking fees of $2.6 billion rose 25% year-over-year, driven by increases in each of advisory, debt underwriting, and equity underwriting. For 2025, we maintained our number one position in the league tables for announced and completed M&A and also ranked first in leveraged lending. We ranked third in equity underwriting and second in common stock offerings, convertibles, and high-yield offerings. Even with very strong accruals in the fourth quarter, our investment banking backlog rose for a seventh consecutive quarter to a four-year high, primarily driven by advisory. As David mentioned, we are optimistic on the investment banking outlook for 2026 and the multiplier effect this activity has across our franchise. FIC net revenues were $3.1 billion in the quarter, up 12% year-over-year. In intermediation, the 15% year-over-year increase was driven by rates and commodities. And in financing, revenues rose 7% to a new record on better results within mortgages and structured lending. Equities net revenues were $4.3 billion in the quarter. Equities intermediation revenues were $2.2 billion, up 11% year-over-year on better performance and derivatives. Equities financing results in a quarterly record of $2.1 billion, up 42% versus the prior year amid record average balances in prime. For the full year, total equities net revenues were a record $16.5 billion, surpassing last year's record by over $3 billion, helped by the multi-year investments we've made in this business. Moving to asset and wealth management on page 20. For 2025, revenues were $16.7 billion, and our pre-tax margin was 25%. Segment ROE for the year was 12.5%, and in the mid-teens, when adjusted for the 230 basis point impact from HPI and its related equity, as well as the FDIC special assessment fee. In the quarter, management and other fees were a record $3.1 billion, up 5% sequentially and 10% year-over-year. Private banking and lending revenues rose 5% year-over-year to $776 million, as higher results from lending and deposits related to wealth management clients were partially offset by NIM compression in the Marcus deposit portfolio. Incentive fees for the quarter were $181 million, bringing our full-year incentive fees to $489 million, up 24% versus the prior year. We expect to make further progress in 2026 towards our annual target of $1 billion. Now moving to page 21. Total assets under supervision ended the quarter at a record $3.6 trillion, driven by $66 billion of long-term fee-based net inflows across asset classes and $50 billion of liquidity inflows. In conjunction with our new long-term fee-based inflow target and wealth management, we are providing enhanced disclosures outlining inflows and long-term AUS by channel. Turning to page 22 on alternatives. Alternative AUS totaled $420 billion at the end of the fourth quarter. driving $645 million in management and other fees. Gross third-party fundraising was $45 billion in the fourth quarter and $115 billion for the year. Moving to page 24, our total loan portfolio at quarter end was $238 billion, up sequentially reflecting higher collateralized lending balances. Provision for credit losses reflected a net benefit of $2.1 billion, including the previously mentioned reserve release associated with the Apple Card portfolio. Let's turn to expenses on page 25. Total operating expenses for the year were $37.5 billion. Compensation expenses were $18.9 billion and included $250 million of severance costs, driving a full-year compensation ratio net of provisions of 31.8%. Full-year non-compensation costs of $18.6 billion We're up 9% year-over-year, driven primarily by higher transaction-based activity. While the operating environment for our businesses continues to improve, we remain committed to our key strategic priority of operating more efficiently and are maintaining a rigorous focus on advancing our productivity and efficiency initiatives as part of One Goldman Sachs 3.0. Our effective tax rate for 2025 was 21.4%. For 2026, we expect a tax rate of approximately 20%. Next capital on slide 26. Our common equity tier one ratio was 14.4% at the end of the fourth quarter under the standardized approach. In the fourth quarter, we returned approximately $4.2 billion to common shareholders, including common stock repurchases of $3 billion and dividends of $1.2 billion. In conclusion, our strong performance this year reflects the strength of our client franchise and our multi-year execution on our strategic priorities. We see a highly constructive setup for 2026 as the improving investment banking environment and our deep client connectivity position us to capture significant opportunities across the entire firm. At the same time, we remain mindful that the operating environment can shift quickly. Economic growth, policy uncertainty, geopolitical developments, and market volatility are factors we continue to monitor closely. And as always, disciplined risk management will remain central to how we serve clients and allocate resources. Even so, with solid momentum and growth opportunities across our businesses, we are optimistic on the forward outlook for Goldman Sachs and remain confident in our ability to deliver for clients and drive strong returns for shareholders. With that, we will now open up the line for questions.