Goldman Sachs Group Inc (NYSE:GS) Q4 2019 Earnings Conference Call - Final Transcript

Jan 15, 2020 • 09:30 am ET


Goldman Sachs Group Inc (NYSE:GS) Q4 2019 Earnings Conference Call - Final Transcript


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Stephen M. Scherr

investments in technology and new businesses including specifically Marcus, Apple Card, transaction banking and United Capital added another 300 basis points. We also incurred additional expenses from our consolidated investments.

For the full year, the total pre-tax impact of our organic business projects, including Marcus, Apple Card and transaction banking is approximately $700 million, resulting in a drag of roughly 70 basis points on our ROE. At Investor Day, we will talk more about our plans for these businesses to scale over the coming years, and how we expect them to be accretive to our returns.

For the full year, our efficiency ratio was 68%, which includes a 340-basis point impact from litigation expense. Finally on taxes, our reported tax rate was 17% for the fourth quarter and 20% for the year. Our tax rate this quarter reflected the impact of updated guidance from the US Treasury regarding the BEAT tax, and incorporates an adjustment to prior quarterly accruals relating to this guidance. Given this updated guidance, we expect our tax rate over the next few years to be approximately 21%.

Turning to select balance sheet data on Slide 12, let's begin with capital. Our common equity Tier 1 ratio was 13.3% using the standardized approach, down 30 basis points sequentially, driven by lower shareholders' equity. Our ratio under the advanced approach increased by 30 basis points to 13.7% due to enhancements in loss given default severity modeling, that were favorable to the ratio. Our SLR of 6.2% was flat sequentially.

During the full-year 2019, we returned a total of $6.9 billion of capital to common shareholders through both share repurchases and common stock dividends. Our basic share count ended the quarter at another record low, 362 million shares, down over 30% from our peak in 2010. Our book value per share was $219, up 5% versus a year ago.

As you will recall, our share repurchase authorization for the 2020 CCAR cycle, beginning in the third quarter of 2019, was $7 billion or $1.75 billion a quarter. In the third quarter, we repurchased only $673 million, carrying forward the unused authorization. In the fourth quarter, we repurchased $2.2 billion, utilizing approximately $400 million of the prior quarters' unutilized capacity. Going forward, we carry a repurchase authorization of approximately $4.2 billion over the next six months. As we make capital return decisions, we will continue to balance our priorities of prudent capital management and the return of capital in excess of what is needed for investment that is shareholder accretive. As such, the magnitude of our forward repurchases will, as always, depend on our earnings, capital levels and competing investment opportunities.

Now turning to the balance sheet. Total assets ended the year at $993 billion, essentially unchanged versus the third quarter, and up 7% versus last year, driven by higher client activity and areas of growth across the firm. On the liability side, our total deposits increased to $190 billion, up $32 billion versus last year, while our total unsecured