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 2026 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 13, 2026. I will now turn the call over to Chairman and Chief Executive Officer David Solomon and Chief Financial Officer Denis Coleman. Thank you. Mr. Solomon, you may begin your conference.

Thank you, operator. Good morning, everybody. Thank you for joining us. We delivered very strong performance in the third quarter, generating net revenues of $18.7 billion, the second highest in our history, earnings per share of $17.01, An ROE of 18.7% and an ROTE of 20.5%. Our quarterly results included the impact of an accelerated charitable contribution. Excluding that contribution, quarterly EPS would have been approximately $18 and ROE and ROTE would have been approximately 20% and 21.5% respectively. For the year to date, we delivered record revenues driving an ROE of 20.7% and an ROTE of 22.4%. While the third quarter began with optimism around a potential resolution of the conflict in the Middle East, renewed geopolitical tensions and continued disruption of energy flows added complexity to the outlook, increasing oil prices, reigniting inflation concerns and driving bond yields higher. Against this backdrop, the Fed raised rates in September for the first time in three years, with markets pricing in approximately 75 basis points of additional tightening in this cycle across the U.S., U.K., and Europe. Despite these cross-currents, the health of the underlying U.S. economy has remained solid with strong corporate earnings growth, GDP growth of 2.2%, and a very resilient labor market. In complex environments such as these, clients rely on the advice, execution, and remediation expertise of Goldman Sachs to navigate uncertainty and advance the most important strategic priorities. In global banking and markets, we generated the second highest revenues in our history. Within investment banking, advisory revenues were a record, and we maintained our longstanding number one position in M&A, advising on $1.5 trillion of announced transactions for the year. We maintained our year-to-date lead over our closest peer of approximately $430 billion, the largest lead we've ever had. as clients turn to us for advice on significant transactions, including Huggy Face's $13 billion sale to Nvidia and Integer Holding's $6 billion sale to KKR. As you'll remember, we entered the quarter with our highest backlog in five years, and even with exceptionally strong revenue production in the quarter, our backlog remains very robust, reflecting the strength and breadth of client engagement across our leading investment banking franchise. In equities, we delivered our second-best performance after last quarter's record results, with strength across both intermediation and financing. In FIC, we remained steadfast in supporting our clients' global risk intermediation needs across asset classes amid sharp moves in rates and increased volatility in commodities. Importantly, financing activities have become a larger and more durable component of our markets businesses, representing over 40% of FIC and equities revenues year-to-date. This progress reflects strong client demand, prudent balance sheet deployment, and continued execution against our strategic priorities, including deliberate multi-year investments in Asia, which we highlighted earlier this year as an opportunity to drive further share gains. This dynamic market backdrop has also reinforced the importance of trusted advice and diversified investment solutions for asset wealth management clients. Our scaled and durable platform brings together leading investment capabilities across public and private markets and delivers them through deep institutional relationships. Our ultra-premier high net worth wealth management franchise and our expanding third-party distribution network. The strength of this platform continues to drive exceptional growth at scale. In the third quarter, management and other fees increased 22%. year-over-year to a record $3.6 billion and surpassed $10 billion for the year to date. Our assets under supervision reached another record of $4.1 trillion, supported by $97 billion of long-term net inflows representing our 35th consecutive quarter of inflows. In wealth management, $47 billion of long-term net inflows contributed to record client assets of $2.1 trillion. For 2026, wealth management Long-term net inflows are annualizing at 12%, well ahead of our 5% target, which underscores the strength of our client relationships built on trust and long-term performance. In alternatives, we are driving strong growth, with alternative assets under supervision up 26% year-over-year to a record $491 billion. We continue to see strong momentum in fundraising, with $37 billion raised in the quarter, Driving a total of $122 billion in fundraising for the year to date, reflecting investor demand for experienced investment managers. Considering this strength, we now expect full-year fundraising of roughly $150 billion. Given the sustained levels of investment performance for clients, our leading asset and wealth management business remains very well positioned for continued growth amid attractive secular tailwinds. At the same time, we are also inorganically accelerating growth and building a stronger platform with a better product offering for clients. In August, we announced agreements to acquire NEOS, a market leader in derivative income ETFs with approximately $35 billion in AUS at quarter end, and LCN Capital Partners, a leading triple net lease investment manager. acquisition would bring our global active ETF assets under supervision to over $90 billion, establishing Goldman Sachs among the top eight providers by assets under supervision and top six by revenue, while LCN broadens the range of private real estate investment solutions we can offer. Importantly, these acquisitions also bring talented and entrepreneurial teams to Goldman Sachs. We remain focused on opportunities that enhance distribution Deepen investment capabilities and add products to strengthen asset wealth management. Our bar for strategic financial and cultural fit remains very high, and we will continue to allocate capital dynamically and with discipline as we drive growth. All in, our record year-to-date revenues are the result of years of focused execution that have strengthened our market-leading businesses and increased connectivity across the firm as we harnessed the power of one Goldman Sachs. Importantly, we have created a higher revenue base with our more durable revenues having more than doubled since 2020 investor day and now representing approximately 45% of revenues for the year to date. The increased durability coupled with our expense discipline and prudent capital management enhances the resilience of our earnings and supports higher returns through the cycle. providing Goldman Sachs with an even stronger foundation for growth. Looking forward, though uncertainty persists, corporates and investors recognize that standing still can be a competitive disadvantage. Clients are taking action to modernize operations, secure critical capabilities, and reallocate capital towards their highest return opportunities. All of this is driving demand for M&A, capital formation, financing, risk management, and advice. playing directly to the strengths of our franchise. An ongoing theme has been the growth in AI infrastructure investment. Recent studies estimate that the U.S. data center build-out could require north of 10 trillion in investment through 2032, averaging roughly 3.6% of U.S. GDP annually. In our conversations with clients, demand for compute significantly exceeds supply at the moment. creating opportunities to help develop financing structures to meet that capacity shortfall. Our differentiated financing, distribution, and investing capabilities position us to play a meaningful role in the mobilization of capital and supporting client activity. While we are proud of the privileged position we play in the AI investment cycle, no one knows how the demands for capital and compute will evolve as the broader AI ecosystem matures. That will only become clearer as technology and markets continue to develop. This uncertainty reinforces the importance of remaining vigilant around the types of activity we finance and how we manage risk as we support our clients. We are highly selective about the risk we underwrite and the capital we commit, particularly as client financing needs become larger and more complex. Beyond these financial risks, we also recognize The broader concerns around the accelerating pace of AI technology and the unchecked advancement of frontier models. Like other transformative technologies, AI presents significant opportunities, but also significant risks that must be carefully assessed and managed. However, the choice is not between hoping progress and moving forward without guardrails. We must enable innovation and also demand responsibility. The experience of the financial services industry has demonstrated the value of rigorous testing, independent review, and continuous monitoring and clear human accountability. These principles, implied in ways that reflect the unique characteristics of AI, can help build the trust and confidence needed to deploy the technology responsibly at scale while companies, developers, and governments work together to establish appropriate safeguards. All in, we continue to see meaningful opportunities ahead of us. We are incredibly well positioned given our relentless focus on serving our clients while remaining vigilant to emerging risks in this dynamic environment. Our culture of teamwork, excellence, and partnership remains a key differentiator that has enabled us to adapt, innovate, and execute through a range of environments. I've never been more confident in our ability to create long-term value for shareholders by making the right investments to grow the firm and generate sustainable earnings growth. With that, I'll turn it over to Denis to walk through our financial results in more detail.

Thank you, David. Good morning, everyone. Let's start with our results on page one of the presentation. In the third quarter, we generated net revenues of $18.7 billion, earnings per share of $17.01, which drove a quarterly ROE of 18.7% and ROTE of 20.5%. Turning to segment performance starting on page three. Global banking and markets revenues were $13.5 billion in the third quarter, our second highest quarterly revenues, contributing to a segment ROE of 23.5% for the year to date. Moving to page four, advisory revenues of $1.7 billion reached a quarterly record and rose 18% year over year driven by higher volumes. For the year to date, we maintained our number one league table position for announced and completed M&A volumes. In equity underwriting, revenues of $666 million rose 43% year-over-year on strong IPO and secondary offerings activity. In debt underwriting, revenues were $904 million, up 15% year-over-year, driven primarily by stronger investment-grade activity. Year-to-date, we ranked number one in equity underwriting, number two in leveraged loans, and number three in high-yield debt underwriting. Even amid very strong accruals in the quarter, our investment banking backlog remains very robust. as strong revenue realizations and advisory were largely offset by solid replenishment and equity underwriting. Year-to-date sponsor share of announced M&A remains below historical averages, presenting further upside when activity picks up. Thick net revenues were essentially unchanged year-over-year. Intermediation revenues declined 7% as lower results in mortgages, rates, and credit were largely offset by strong performance in currencies and commodities. Financing revenues increased 14% to their second highest level, driven by strength in mortgages and structured financing. Equities net revenues were $6.4 billion, up 72% year-over-year, representing our second best quarter, driven by strong performance in both intermediation and financing. Equities intermediation revenues rose 52% to their second highest level, driven by strength in derivatives. Equities financing revenues rose 96% to a record, Thank you all for joining us today. We continue to see structural tailwinds for the growth in tradable assets and the increasing financing needs associated with those assets, which have helped to support sustained industry growth in equities financing over time. Year-to-date, total financing revenues of $12.7 billion were a record and represented over 40% of combined FIC and equities revenues. As David mentioned, growth in financing revenues has contributed to greater durability in FIC and equities and is underpinned by a robust risk framework. that includes diversified exposures, limits, concentration management, and comprehensive stress testing. Let's turn to page five. Asset and wealth management revenues were $5.1 billion, up 14% year over year. Management and other fees rose 22% year over year to a record $3.6 billion, reflecting the impact of higher average assets under supervision. Incentive fees were $587 million. Through our ultra high net worth wealth management franchise, We provided clients early access to a high-growth investment opportunity and recognized incentive fees following the company's IPO. Based on our current outlook, we expect incentive fees to remain elevated in the fourth quarter. Private banking and lending revenues were $827 million, up 20% sequentially, driven by higher net interest from consumer deposits. Loan balances were up 6% to $51 billion. Investment revenues were $50 million. Given the timing of certain monetizations following a strong second quarter and certain markdowns. Now moving to page 6. Total assets under supervision ended the quarter at a record $4.1 trillion, supported by $97 billion of long-term fee-based net inflows, marking our 35th consecutive quarter of long-term fee-based net inflows. Wealth management client assets reached another record of $2.1 trillion, with $47 billion of long-term net inflows. Turning to page 7, alternative assets under supervision totaled $491 billion at the end of the third quarter, driving $860 million in management and other fees, the best performance since our 2020 investment day. Gross third-party alternatives fundraising was $37 billion for the quarter and $122 billion for the year to date. On page 9, firm wide net interest income was $3.8 billion. Our total loan portfolio increased 6% from the prior quarter to $276 billion, reflecting broad-based growth across the portfolio. Our provision for credit losses was $368 million. While overall credit quality and portfolio performance have remained strong, our provisions reflected certain impairments across our portfolio as well as overall growth and lending. Turning to expenses on page 10. Total operating expenses were $11.3 billion for the quarter. For the year to date, total operating expenses were $33.4 billion for an efficiency ratio of 59.4%, improving 270 basis points from the prior year and in line with our target. Our year-to-date compensation ratio net of provisions was reduced to 30%. We remain committed to paying for performance and delivering operating leverage for shareholders. Quarterly non-compensation expenses were $6.2 billion, 30% higher year-over-year driven largely by higher transaction-based expenses. Additionally, given the strong pull-through of incentive fees this quarter, we made a tax-efficient charitable contribution of approximately $450 million as part of a planned acceleration of our philanthropic efforts. We also expect to make a meaningful contribution in the fourth quarter. Together, these actions will pull forward at least five years of planned charitable giving. The impact of our charitable contributions on quarterly EPS was approximately $1, while the impact on ROE and ROTE was approximately 1.1 percentage points each. Our effective tax rate for the year to date was 20.4%, and for the full year, we continue to expect an effective tax rate of approximately 20%. Now on to slide 11. Our common equity tier 1 ratio was 12.4% at the end of the third quarter under the standardized approach, 100 basis points above our current capital requirement of 11.4%. Regarding recent regulatory developments, we welcome the Federal Reserve's rule finalization to enhance the transparency and accountability of the CCAR stress test and reduce the volatility of capital requirements. We also recognize the progress of the Basel III endgame and GSEP re-proposals and are hopeful for finalization by the end of the year. Collectively, these developments represent meaningful progress towards a more balanced and risk-sensitive regulatory capital framework that preserves the strength and resilience of the banking system. As the rules are finalized, we support appropriately calibrated requirements that are aligned with the risks firms actually take and look forward to the timely completion of these reforms. We expect regulatory focus to soon shift towards liquidity regulation reform. We currently have over $570 billion in average global core liquid assets, representing approximately 25% of our total assets, and our liquidity coverage ratio is among the highest in our peer group. In the quarter, we repurchased $3 billion of our common stock and paid $1.5 billion in dividends. We continue to have significant capacity to deploy capital prudently in service of clients while maintaining an appropriate buffer. In conclusion, our third quarter performance reflects the strength of our client franchise which has been bolstered by years of strategic execution. We've built market leading franchises, deep relationships, and a higher and more durable revenue base. We remain focused on delivering strong returns while continuing to invest in our people, technology, and client franchises to drive long-term earnings growth and deliver for our shareholders. With that, we'll now open up the line for questions.