Goldman Sachs Group Inc Q4 2024 Earnings Call Transcript

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

Question: Ebrahim Poonawala - BofA Securities - Analyst : Good morning. I guess, maybe just David following up on the comments you made around regulations. Like when you talk to investors, I mean, we saw what happened with the SCB last year and I think there's been a laser focus on being more punitive and capital markets post GFC for many justifiable reasons, but just talk to us when you think about the regulatory outlook and I appreciate significant uncertainty. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 2:30PM, GS.N - Q4 2024 Goldman Sachs Group Inc Earnings Call We're waiting for policymakers to kind of take new feed. But how do you think that plays out and in particular in terms of the operating backdrop for your capital markets business and investment banking business? Like how should we think about how could it be different over the next 2 years to 3 years relative to the last 5 years or even 10 years?

Question: Ebrahim Poonawala - BofA Securities - Analyst : That's fair. And just to follow up on the slide 5, you mentioned the forward catalyst increased sponsor activity. We've been waiting for this, we see some signs of pick up there. You've talked about M&A being sort of sub 10 year averages, give us a sense of just how quickly means we know the [DOJ FTC] backdrop will be more conducive for deal making, is how quickly could we see a more significant ramp up around deals IPOs, is it a second half event? Could we see that as early as the next couple of months?

Question: Christian Bolu - Autonomous Research - Analyst : Good morning, David and Denis. Maybe apologies for maybe a tick question here. But if I'm reading the slides correctly, footnotes 11 and 12, which help bridge your ROE GAAP to 15%. Are you assuming sort of roughly $9 billion of capital return from HPI and platform solutions to shareholders? Because if you are -- maybe talk through how that buts against things like SLR constraints at that level of capital return and then just more broadly on capital just given the improving opportunity set here. How, how are you balancing returning capital to shareholders versus investing in the business?

Question: Christian Bolu - Autonomous Research - Analyst : Okay. Got you. Maybe David, look kudos to you on the firm. You're currently taking share across your businesses, whether it's markets or in alternatives and in private wealth doing a great job. But just given to your point, the improved opportunity set here and perhaps more friendly regulatory environment. Any thoughts on doing a strategic deal to accelerate your growth prospects within alts or private wealth?

Question: Betsy Graseck - Morgan Stanley - Analyst : Hi, good morning.

Question: Betsy Graseck - Morgan Stanley - Analyst : Oh, hi. I did just want to follow up on one thing here regarding the point you were making on platform solutions. It's a drag right now. 75 bps to 100 bps on ROE but '25 and '26 that will improve. So could you just step us through? I mean, we know what your plans are for platform solutions, but I'm wondering what's happening in '25 and '26 that will drive the reduction of the drag in this year and next, if you can speak through that.

Question: Betsy Graseck - Morgan Stanley - Analyst : Okay, great. And then separately on the changes that were discussed with regard to how you're structuring the financing team that's within investment banking, if I got it right. Could you just help us understand how does this management structuring change the revenue growth outlooks that you're looking for? Like why does this --

Question: Betsy Graseck - Morgan Stanley - Analyst : Deliver better growth?

Question: Brennan Hawken - UBS - Analyst : Good morning. Thanks for taking my question. You spoke earlier to the capital unlock within the improving ROEs in AWM, but some of the more business oriented components would be driving lending solutions within wealth and scaling the flagship products in alts which I thought was interesting. I was hoping you could speak to lending penetration and where that sits versus your target within the wealth business. And whether there's been an uptick in demand more recently given some of the market developments and what contribution you're expecting from ranking the flagships and maybe highlighting some of those franchises. Thanks.

Question: Brennan Hawken - UBS - Analyst : Great. Thanks for that color. And David spoke to some of the operating efficiencies when reviewing, when giving the strategic update. It's interesting because how do we think about the push and pull of expenses and efficiencies as we move into 2025 given the expectations for a pretty robust and all the indications you've given for a pretty robust improvement in capital markets activity or maybe if it's easier to answer, what's the right way to think about incremental margins on revenue growth as we move forward?

Question: Mike Mayo - Wells Fargo Securities - Analyst : Hey David, there was another Wall Street CEO said he was the most positive. He's been in 25 years. So how good could things get in your mind? Because you're saying the regulatory environment, the economic environment, the backlogs are up and that's if I was doing a model for the industry, do you, we go back to the 21 pandemic highs. And on the other side of this, as highlighted by slide 9, you're all focused on expenses and on the if -- maybe if rates go up too much, what level of a 10 year yield do you think it puts a wrinkle in the kind of the bullish thesis you're laying out here a 10 year, 5% 6% 7%. What's the most likely thing that would derail your lofty expectations?

Question: Mike Mayo - Wells Fargo Securities - Analyst : And then specifically, I guess why is platform solution still around? I mean, you're number one in deal making and you haven't been able to work that out. And on the other hand, the financing organic growth, how big is that today? And how big do you expect that to be in five years? And what about, credit risk that's related to that? Thanks.

Question: Devin Ryan - Citizens JMP Securities - Analyst : Thanks so much. Good morning, David and Denis. First question just on the banking and markets, market share, wallet share, obviously incredibly impressive over the last handful of years. And I think just a testament to the execution. When we look at this kind of new capital solutions organization, it would seemingly better position with sponsor clients and just, I think gives that indication of where you guys are going there. How do you think about your market share today with sponsors and not sure if you can give any framework or numbers there. And then how you think about the ability to take share in that group and how important that will be to driving further kind of wallet share games from here like you've done in the past? Thanks.

Question: Devin Ryan - Citizens JMP Securities - Analyst : Great. Thank you. And then just in terms of the on the alternative asset management fundraising has been terrific. How should we think about the pace of deployment of kind of that record fundraising and then just kind of the trajectory of kind of the acceleration and performance fees because it would seem that could be pretty big step function higher in performance fees, but you need to deploy that capital first. So just the time line to kind of think through that path. Thank you.

Question: Dan Fannon - Jefferies - Analyst : Thanks, good morning. I wanted to follow up on the alternatives. You talked about consistent levels of fundraising. As you look at '25, could you maybe talk to the asset classes or the funds that you think will drive the that growth going forward and how the fees may be different? Or are they the same as kind of what's in the ground of your existing book of alternatives today?

Question: Dan Fannon - Jefferies - Analyst : Understood. And then just as a follow up, both asset and wealth management, revenues on the management fee side saw good growth year-over-year, both for the year and the fourth quarter, there was a little bit higher growth and wealth both in the fourth quarter in the year. I guess, as you look at those businesses going forward, do you expect to see a divergence in either of those segments or do you think that consistently they will both grow at similar levels?

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Hi, Denis and David. David or Denis, can you share with us -- I mean, the outlook, many of us, you folks included, I think it looks very positive for the capital markets businesses, the economy, et cetera. And aside from the geopolitical risks that are obvious to all of us, can you guys give us two or three risks, where could derail this shared optimism we have for the outlook for the business? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 15, 2025 / 2:30PM, GS.N - Q4 2024 Goldman Sachs Group Inc Earnings Call

Question: Gerard Cassidy - RBC Capital Markets - Analyst : Yeah. No, I agree with that. That's for sure. Thank you, David. And then coming back to, obviously you guys have been investing heavily in technology for years and in driving those operating efficiencies in slide 9, you talk about them, particularly in automation and then you talk about leveraging the AI solutions. As outsiders, when do you think we'll be able to see the success that you're having with AI. I know there's probably early successes already, but will it become a time when we'll be able to say, wow, earnings are actually favorably impacted by X percent because of this success in the AI implementation that you've done.