The Goldman Sachs Group, Inc. (NYSE:GS) Q1 2018 Earnings Conference Call - Final Transcript

Apr 17, 2018 • 09:30 am ET


The Goldman Sachs Group, Inc. (NYSE:GS) Q1 2018 Earnings Conference Call - Final Transcript


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Good morning. My name is Dennis, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs First Quarter 2018 Earnings Conference Call. This call is being recorded today, April 17, 2018. Thank you.

Ms Miner, you may begin your conference.

Heather Kennedy Miner

Good morning. This is Heather Kennedy Miner, Head of IR at Goldman Sachs. Welcome to our first quarter earnings conference call.

(Forward-Looking Cautionary Statements)

This audio cast is copyrighted material of the Goldman Sachs Group, Inc. and may not be duplicated, reproduced or rebroadcast without our consent.

I will now pass the call over to our CFO, Marty Chavez. Marty?

Martin Chavez

Thanks, Heather, and thanks to everyone for joining us this morning. I'll walk you through our first quarter results and make some brief comments on the broader opportunity set for the firm. And of course, I'm happy to answer any questions.

First quarter net revenues of $10 billion were up 25% versus the first quarter last year. Net earnings of $2.8 billion were up 26%. Earnings per share were $6.95, up 35%. Return on common equity was 15.4%, representing our highest quarterly return in over 5 years. While we're pleased with our strong first quarter performance, it's worth stepping back to put these results and the environment into context.

The last time we generated over a 15% return, the environment was different in several ways. Five years ago, global growth was generally improving but still slow, and we were embarking on a period of unprecedented global central bank stimulus. In contrast, the start to 2018 has been characterized by a healthy backdrop of synchronized global growth and rising interest rates. Better growth prospects are supporting central bank efforts to reduce stimulus, which has been a primary factor driving the below- average market volatility seen in recent years.

During the first quarter, the positive outlook for global growth translated into improved corporate and investor confidence and subsequently solid activity across the firm, particularly in our Investment Banking and market making businesses.

Compared to the first quarter last year, Investment Banking, FICC, Equities, Investing & Lending and Investment Management each produced net revenue growth, with four of the five increasing 18% or more. While it's impossible to predict the future, we remain cautiously optimistic that many of the broader drivers underpinning the solid start to the year, healthy economic growth, relatively positive investor sentiment and the emergence of new market trends, can remain in place.

We are pleased with our improved performance in the quarter as it demonstrates the earnings power of our diversified franchise and shows what is possible with modest improvements in the environment and client activity. And we believe there is room for additional revenue and earnings growth as we further diversify our global franchise across the broader client base with an expanded suite of products and services. Let's discuss the individual businesses.

Investment Banking produced net revenues of $1.8 billion, 16% lower than a very robust fourth quarter, which was our