The Goldman Sachs Group, Inc. (NYSE:GS) Q2 2018 Earnings Conference Call - Final Transcript

Jul 17, 2018 • 09:30 am ET


The Goldman Sachs Group, Inc. (NYSE:GS) Q2 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 Second Quarter 2018 Earnings Conference Call. This call is being recorded today, July 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 second quarter earnings conference call.

(Forward-Looking Cautionary Statements)

And you should also read the information on the calculation of non-GAAP financial measures that's posted on the Investor Relations portion of our website, This audiocast 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?

Marty Chavez

Thanks, Heather. And thanks to everyone for joining us this morning. I'll walk you through our second quarter and first half results, then cover each of our businesses. And of course I'm happy to answer any questions.

Second quarter net revenues were $9.4 billion. Net earnings were $2.6 billion. Earnings per share were $5.98. Return on common equity was 12.8%, and return on tangible common equity was 13.5%.

Turning to year-to-date results. We had firmwide net revenues of $19.4 billion, net earnings of $5.4 billion, earnings per diluted share of $12.93. We grew first half revenues by 22% or $3.5 billion versus the first half of 2017, while pretax earnings were up 33%. Year-to-date return on common equity was 14.1% and return on tangible common equity was 14.9%.

Stronger revenues across our businesses and positive operating leverage drove first half ROTE of roughly 15%, our best first half performance in nine years. We achieved those results and at the same time, made meaningful investments to support future growth. Our first half revenue growth resulted from broad-based momentum across the firm as all four of our business segments grew at a double-digit pace versus the first half of 2017. Institutional Client Services increased 24%, reflecting a 32% rebound in FICC where we continued to grow our client franchise and strengthened our market-making capabilities.

During the second quarter, we saw solid client engagement across our businesses with positive macro trends supporting corporate and investor activity. With the backdrop of rising US rates and better visibility on QE in Europe, trends emerged across a variety of markets and asset classes. This quarter, our clients responded to a stronger US dollar, weaker EM currencies, higher oil prices and a divergence between US investment grade and high-yield spreads. Despite the persistence of geopolitical and economic risks, the backdrop remains constructive as our clients continue to seek our advice and market-making services. 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, positive investor sentiment and the emergence of new market trends can remain in place.

Let's review individual business performance for the second quarter. Investment Banking produced