Earnings Call, Conference Presentation, Investor Day
A Conversation with David Solomon - Goldman Sachs 2020 Investor Day
Goldman SachsDavid Solomon, Julian Wellesley, Brennan, Mike, Kiana Wilson, Doug, Christian Bolu, Glenn, Betsy, Devin, Steve, John, Gerard Cassidy, Matt O'Connor, Jeff Hart
- Goldman Sachs expects to execute its expense optimization plan over a three-year period, with non-linear, non-front-loaded cost reductions derived from middle and back-office efficiency rather than cuts to the client-facing front end.
- The firm aims to close a portion of the $1.2 billion gap in its markets and fixed income and credit (FIC) business, targeting approximately $500 million in closure during the current focused period, while operating with a target capital ratio of 13% to 13.5%.
- Over a five-year horizon, assuming flat revenues, the firm anticipates optimizing into debt products on the balance sheet to take capital out based on mix efficiency relative to Fed stress tests, while maintaining flexibility by providing CET1 targets rather than specific payout ratios.
- Goldman Sachs is rolling out its "one Goldman Sachs" approach to over 100 significant clients and plans to expand its footprint among the 100 largest securities clients and in ultra-high-net-worth management across Europe and Asia to capture further wallet share.
- The firm expects revenue to begin growing faster than expenses within the medium term as it moves up the J-curve, supported by investments in transaction banking, consumer banking, and an integrated digital product suite that will eventually expand beyond current three-year targets.
- In consumer banking, the firm aims to take share from the remaining 50% of the U.S. market (excluding the top four banks) by leveraging digital branch systems and an integrated service model, with a focus on being adaptive and nimble over a 10 to 20-year disruption cycle.
- Strategic decisions include moving equity from the balance sheet into fund structures, strengthening the deposit base digitally in U.S. Bank, and mixing investment banking with commercial activities to align with the regulatory capital regime.
- The firm intends to update investors annually on key performance indicators and targets, though no specific roadmap or minimum ROE target was provided, while capital not used for accretive business deployments will be returned to shareholders.
- Goldman Sachs believes it can build a profitable consumer lending business by measuring credit cycles tightly and managing the Marcus platform closely, with current loss experiences aligning with modeled expectations despite uncertainty regarding future pricing power.
- The firm assumes global markets businesses can meet hurdle rates independently and generate superior returns when integrated into the corporate and investment bank ecosystem, aiming to compound book value over the long term.