Goldman Sachs Group Inc Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Glenn Schorr - Evercore ISI - Analyst : So obviously, really good trading results, but you mentioned also on the financing side, how good it was. I'm curious on the amount of deleveraging that we've seen in April. I'm assuming that's pretty good for intermediation, but how do we think about that in terms of the short term impacts on financing until we get a kind of a reload of leverage?

Question: Glenn Schorr - Evercore ISI - Analyst : I mean is that like material in terms of the impact? And when you're at record PB balances and then you have the amount of deleveraging that we saw in early April, if it stays at this level, is that a major contributor to the growth in financing in the quarter?

Question: Ebrahim Poonawala - BofA Global Research - Analyst : I wanted to follow up on Glenn's question. I guess Denis, I think the view is the world in markets changed a little bit come April 2, and the risk from an investor standpoint is activity has fallen off the cliff. It's negative for financing. It could be negative for trading. So I'm not sure if you have data in terms of the 10 days for April. And if you can give us -- if you can contextualize just how negative the last 10 days have been following a very strong 1Q and how we should think about just where clients are as we go back to debating good volatility versus bad volatility.

Question: Ebrahim Poonawala - BofA Global Research - Analyst : And if I could follow up. Denis, you mentioned executing on the three year efficiency plan and the pyramid structure. Just talk to us. I think there were some headlines last month around, I guess, regular sort of merit-based review of the headcount. Like what we're doing on the expense side as we think about the 60% efficiency target and maybe some resiliency to earning from -- on the cost side that we could expect?

Question: Christian Bolu - Autonomous Research - Analyst : Maybe just staying on the topic of the markets businesses. I wanted to talk about the competitive landscape. You guys did very well in the quarter on an absolute basis, but it did lag peers in the quarter. And I appreciate it's just one quarter. You do have a track record of share gains, but just curious what you're seeing currently on the competitive landscape in end markets. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 14, 2025 / 1:30PM, GS.N - Q1 2025 Goldman Sachs Group Inc Earnings Call

Question: Christian Bolu - Autonomous Research - Analyst : On the buyback, impressive that you guys stepped it up fairly meaningfully in the quarter. What was the catalyst that drove the step up in the buyback? Was it the share price level, just excess capital? I'm just trying to understand if this level of buyback is sustainable going forward.

Question: Betsy Graseck - Morgan Stanley - Analyst : So on the capital question, David, earlier in the prepared remarks, you were talking about the regulatory changes that are being anticipated. And the question I have for you is on the SLR ratio. I believe it's one of the ones you're tighter to. And it would be helpful to understand how you're thinking about if the changes come through as being discussed, take treasuries out of the denominator of the SLR, is that something that would be a noticeable benefit for you? Is that something that you think you could lean into relatively quickly? Or give us a sense as to how you plan on using these improvements in capital as they come through. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 14, 2025 / 1:30PM, GS.N - Q1 2025 Goldman Sachs Group Inc Earnings Call

Question: Betsy Graseck - Morgan Stanley - Analyst : Denis, one for you on VAR. Value at risk this quarter was down broadly throughout the different categories Q-on-Q, which I thought was interesting given the heightened volatility that we had across a variety of different markets. Can you remind us how volatility impacts VAR and how we should be thinking about VAR efficiency, which clearly went up dramatically? And just wanted to understand how to think about that on a go-forward basis.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : I mean I guess it's good. You can have record buybacks and the CET1 ratio doesn't change much. On the other hand, I guess you bought back stock quite a bit higher at the current price. And I know you're not market timing this or anything. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 14, 2025 / 1:30PM, GS.N - Q1 2025 Goldman Sachs Group Inc Earnings Call So I'm guessing that reflects your confidence in the amount of excess cap you'll have with the $40 billion new share buyback. So I was just wondering if you could put a little more meat on the bones or the reasoning behind the $40 billion buyback. And specifically, as this is a Reg FD calls, you can give material information. How much capital do you think could be freed up once you dispose of your private investments? You've chopped a lot of wood there. I think that's $8.8 billion. And after you -- if and when you dispose of your credit cards.

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Was Denis going to add to that?

Question: Mike Mayo - Wells Fargo Securities, LLC - Analyst : Well, it's just a specific amount of capital that could be freed up if and when you dispose of your private investments and your credit cards. It seems like that could be a pretty big number.

Question: Steven Chubak - Wolfe Research - Analyst : I had a two-parter on alternatives, David. I was hoping you could speak to bigger picture, just the outlook for sponsor activity across the complex given some of the headwinds to realization activity as well as the heightened macro uncertainty you cited. And then just drilling down to the third party alts disclosure. What contributed to that fee rate contraction on the credit side just given the step down was meaningful? And I know that's a high priority growth area for you and the management team.

Question: Steven Chubak - Wolfe Research - Analyst : And just for a quick follow up, I was hoping to get some color on how you're thinking about potential risks to the deal backlog. Certainly encouraging to see sequential increase in the fee backlog. But as we think about some of the risks, whether it's international and cross-border or specific sectors that are particularly challenged, how you're framing or potentially handicapping the risk of some of these deals coming out of the backlog? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 14, 2025 / 1:30PM, GS.N - Q1 2025 Goldman Sachs Group Inc Earnings Call

Question: Devin Ryan - Citizens - Analyst : I want to continue the conversation, I guess, on the sponsors. Obviously, on the asset management side of the business, fundraising for alt has been terrific. And then as you guys pointed out, LPs are waiting for capital. So there's a lot of, I think pressure on sponsors to return capital. But the IRR is on the maybe the prior vintage that are being realized probably aren't going to be great. So I'm just curious kind of your conversations with sponsors and fundraising, is this an opportunity to further differentiate Goldman or just any other color given some of that tension between sponsors today in the market trying to return capital and what LPs are demanding?

Question: Devin Ryan - Citizens - Analyst : And then just a quick follow up on debt underwriting. It's been a really good story for Goldman. So just love to -- maybe just share a little bit about some of the other cyclicality in the business, some of the other puts and takes that are kind of driving results. And then just the outlook from here just given that it does seem like you guys are taking some share there.

Question: Matt O-Connor - Deutsche Bank - Analyst : I'll follow up on the capital discussion. You seem to have managed the balance sheet really well with this quarter both on the RWAs and the leverage assets. Anything to call out on that because again, like the standardized RWAs barely went up, advanced went down? And usually, you see kind of the opposite what goes up in the first quarter. So any balance sheet optimization that you did this quarter to call out?

Question: Matt O-Connor - Deutsche Bank - Analyst : And then separately, within the historical principal investment book, you had about a $600 million drop in somewhat tough quarter. What's your thought process on the pace from here? And just remind us of that target. I think it was by the end of next year you're targeting around $2 billion. Just remind us if that's right and still stands.

Question: Erika Najarian - UBS - Analyst : So my first question is a follow up on capital. So David, given what you said about the landscape and sort of freeing capital from the industry, we have strong momentum in terms of the stress test, G-SIB surcharge, recalibration, and then Betsy mentioned the SLR. And the question for you is, you are already one of the most optimized businesses in financial services. If we do redefine the definition of excess capital for the industry broadly and for Goldman specifically, how are you going to allocate that freed up capital? How does your -- where do your priorities go? I appreciate the whole -- the stack in terms of clients first and buybacks but within the clients first, within the business, are there any places where you would reallocate even more capital if you do free up and/or change the definition of excess capital?

Question: Erika Najarian - UBS - Analyst : And my follow up question is this. So there's been increased questions from investors about how global investment banks like Goldman, how the standing is impacted by some of the policy volatility if you will in terms of your internationally sourced revenues. And we had sort of two different answers from your peers on Friday. Jamie was a little bit more pessimistic. Ted was a little bit more optimistic about the international revenue, outlook going forward given all of the global policy volatility. And David and Denis, I wanted to get your thoughts on that, on whether or not what the US is doing could impact some of that sourcing.

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Denis, you mentioned in your -- in answering your question about the HPI portfolio that you guys had just over $4 billion of CET1 capital I think it was that supports that portfolio. Can you remind us how will you bleed that capital back in releasing it back in or just releasing it, I should say? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 14, 2025 / 1:30PM, GS.N - Q1 2025 Goldman Sachs Group Inc Earnings Call I know when the $8.8 billion goes to zero, it'll be completely released, but is there a linear way of releasing it, or is it all come at the end when the portfolio drops to about zero?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : And then coming back, David, you've mentioned it a few times in your prepared remarks but also in answering questions. Goldman's in a very unique position, having this global view of the world because of your size and your presence. Can you give us any color on with the uncertainties going forward, is it -- are they more elevated here in the United States than when you talk to clients in Europe or Asia? If you had the lay of the land, where is the greatest uncertainty or the greatest worry when you talk to CEOs around the world?

Question: James Mitchell - Seaport Global Securities LLC - Analyst : We've seen very strong results in equities across the industry at or near record levels, but the industry performance in FICC has been a lot more muted. In your opinion, is that FICC or is that that FICC is already operating at a high level, or do you see opportunities for aspects of that business to improve from here? Just trying to frame the outlook on FICC. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 14, 2025 / 1:30PM, GS.N - Q1 2025 Goldman Sachs Group Inc Earnings Call

Question: James Mitchell - Seaport Global Securities LLC - Analyst : Sure. Yeah, no, I appreciate that. But just maybe thinking through, what areas might be underperforming right now, if any, that could improve in a better environment versus just maybe the different components which you're doing well and which you're doing are underperforming if possible?

Question: Saul Martinez - HSBC - Analyst : I hate to be the dead horse here on capital, but I did want to follow up on Betsy and Matt's questions and what they mean for RWA progression. RWA is up slightly this quarter. Your peers had much bigger increases. Markets in RWA is down, large down. If I look at RWA density on a standardized basis, it came down quite a bit. It's at its lowest level, I think that I can see in recent history. So just is there anything unusual in terms of RWA progression or VAR or exposures? And how do we just rethink about RWA density and RWA progression from here because it obviously does matter in terms of forecasting CET1 ratios and the level of excess capital over time? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 14, 2025 / 1:30PM, GS.N - Q1 2025 Goldman Sachs Group Inc Earnings Call

Question: Saul Martinez - HSBC - Analyst : Maybe just to follow up with a very ticky-tacky question on tax rates. I think you mentioned 21%. I think the previous guide was 20% if I'm not mistaken despite this quarter being -- having it benefited from some discrete items. But I guess that going forward, tax rates should be roughly in the 23% range for the rest of the year if my math's right. I mean just any color on how to think about your tax rate going forward for the rest of the year and what it looks like on a more normalized basis?

Question: Daniel Fannon - Jefferies - Analyst : Just a follow up on the outlook for the fee rate within asset and wealth. You talked about the OCIO wins and obviously, you continue to grow in Alts. So as you think about it on a longer term basis, should this mix shift be higher or do you think those will offset each other? And then also in the quarter, were there any placement fees in the context of the management fee as you reported it?