Executing Our Strategy - Goldman Sachs 2020 Investor Day

Leadership and Strategic Context

• John Waldron, President and Chief Operating Officer, outlines a dual-focus mandate: engaging global clients as President and driving operational excellence as COO.
• The firm's execution strategy rests on three pillars: strengthening the core franchise, investing for growth, and driving operating efficiency.
• Foundational strengths identified include the Goldman Sachs brand heritage, the "One Goldman Sachs" client-centric philosophy, and world-class engineering capabilities.

Investment Banking Growth Plan

• The firm ranks #1 globally but seeks to close gaps in specific industries and geographies to increase wallet share.
• Client Coverage: Expanding the number of covered companies by 30% to deepen penetration with the corporate client base.
• Advisory Advantage: The strategic advisory platform generated approximately $1 billion more in merger revenues than competitors over the past five years.
• Cross-Selling: Leveraging the investment banking franchise to source opportunities for alternatives, private wealth, and global markets divisions.

Global Markets Strategy

• Aiming to deliver industry-leading returns and an ROE exceeding 10% over the next three years.
• Client Rankings: Launching a formal tracking system for the top 100 largest institutional clients to reduce instances where the firm ranks outside the top three.
• Revenue and Cost Mix: Plans to improve returns through both revenue growth (financing volume, technology utilization) and significant operating expense reductions.
• Technology Focus: Enhancing the Marquee platform and bond pricing engine to better serve equity and fixed income clients.

Asset Management Priorities

• Managing $2.3 trillion in total assets, with $320 billion in alternatives, distinguishing the firm as the only player with scale in both traditional and alternative assets.
• Growth Target: Projected to increase traditional assets by $250 billion over the next five years.
• Strategic Focus: Strengthening distribution for large U.S. public institutions and enhancing portfolio management talent.

Consumer and Wealth Expansion

• Private Banking: Expanding the global advisor footprint by 30% over the next three years to capitalize on a 3% market share in a $26 trillion market.
• Lending: Increasing lending penetration, particularly with clients outside the United States.
• Transaction Banking: Targeting a business with $50 billion in deposit balances and $1 billion in revenues within a highly fragmented global market.
• Wealth Spectrum: Scaling high net worth services by adding 30 new programs to cover 300,000 employees annually via the ACO and United Capital platforms.

Alternatives Platform Reshaping

• Asset Growth: Plan to grow third-party alternatives assets by $100 billion over the next five years.
• Structural Changes: Unifying five distinct investing platforms into a single operating division.
• Balance Sheet Optimization: Migrating capital-intensive investments (private and growth equity) to fund forms, resulting in a $4 billion reduction in balance sheet usage over five years.

Digital Consumer Banking

• The digital bank strategy includes the Apple Card launch and expanding savings/lending products, showing dramatic growth in clients and loan balances after three years.
• Goal is to build a multi-product digital storefront to capture share in the fragmented consumer market.

Global Operations and China Strategy

• China: Applying for 100% ownership of the China business to better manage onshore operations and grow asset management/private wealth platforms.
• International: Investing in global presence to extend leadership, supported by co-location strategies in key cities like London and Bengaluru.

Operating Efficiency and Cost Savings

• Savings Target: Executing $1.3 billion in cost savings over the next three years, which will be reinvested into growth priorities.
• Organizational Restructuring: Moving 7,500 engineering and operations staff into business units to better align support with front-office needs.
• Talent Mobility: Flattening the organizational pyramid by reducing management layers.
• Real Estate: Increasing the percentage of employees in strategic locations (e.g., Salt Lake City, Warsaw, Bengaluru) from 33% to 40% to foster centers of excellence in AI, cloud, and data analytics.
• Expense Architecture: Creating an integrated financial planning and analysis system to improve accountability.

"One Goldman Sachs" Implementation

• Pilot Success: A pilot coverage program for 31 firm-wide clients (generating ~$2 billion in revenue) demonstrated success in breaking down silos through unified cross-divisional teams.
• Expansion: The program will scale to 100 clients in 2020, led by next-generation leaders Matt Gibson and Sam Morgan.
• Client Incentives: Shifting incentive structures to reward relationship progress and "One Goldman Sachs" behavior rather than pure revenue metrics.

Engineering and Technology Investment

• Budget Increase: 2020 engineering budget raised by nearly 10% to $4.3 billion (up from $4 billion in 2019).
• Growth Allocation: Over $2 billion of the 2020 budget is allocated specifically to growth priorities, shifting the ratio from 53% run-the-bank/47% growth in 2019.
• Workforce Composition: Engineers now comprise nearly 25% of the total workforce.
• Talent Acquisition: New leadership includes Co-CIO Marco Argenti and CTO Ate Latiranta (ex-Verizon), alongside internal leader George Lee.

Talent and Compensation Alignment

• Incentive Structure: Operationalizing "pay for performance" with enhanced frameworks for the management committee and broader partnership.
• Metrics: Senior leadership compensation tied to specific performance parameters and performance-based equity.
• Partnership Balance: Compensation now balances financial outcomes with long-term client focus, risk management, talent development, and diversity.

Forward-Looking Financial Guidance

• The firm aims to deliver an ROE exceeding 10% over the next three years through a combination of revenue growth and cost efficiency.
• Waldron transitions to Steven for a detailed financial roadmap presentation based on these strategic executions.