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

Jan 15, 2020 • 09:30 am ET

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

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Presentation
Executive
David M. Solomon

in the context of lower industry deal volumes. We held a commanding lead in our M&A business, and maintained our Number 1 position in equity underwriting. While our operating expenses grew as a function of litigation and investments in our businesses, we actively controlled our cost across both compensation and non-compensation, providing capacity to fund our growth. From this position of strength, we achieved important milestones in 2019 across our key growth opportunities.

We continued to institutionalize our One Goldman Sachs operating philosophy, keeping clients at the center of everything we do. We launched the firm's first ever credit card platform in partnership with Apple, and generated over $850 million in net revenues across our broader Consumer Banking business. We completed the initial build of our digital transaction banking platform and processed over $2 trillion of payments on behalf of the firm. Our platform roll-out to the third-party clients remains planned for the first half of this year.

We acquired United Capital, bolstering our capabilities to provide a full spectrum of wealth management services to individuals. We realigned our investing businesses into a cohesive unit to support our alternatives growth platform. We enhanced the effectiveness and efficiency of the firm by integrating major portions of our operations and engineering teams into our businesses. And we strengthened our engineering capabilities with strategic hires of a new Chief Technology Officer, and a Co-Chief Information Officer, and added talent across the firm.

Importantly, we made significant investments to expand our client franchise, grow and diversify our revenues, and operate more efficiently. Including these investments, our overall performance was solid, even though our investments reduced our returns in 2019. We are confident that they are improving the long-term profitability of Goldman Sachs.

Turning to the operating environment on Page 2. In the fourth quarter, we had solid engagement with our institutional clients and strong growth with our individual clients, notwithstanding corporate client sentiment remained more measured. During the quarter, we saw a steadily rising asset prices, improvement in the secured funding markets as the Federal Reserve took steps to bring stability throughout the quarter and particularly over year end. We also saw progress toward Brexit resolution, following the UK general election, and improvements in the US/China trade tensions, including the Phase 1 agreement. These conditions contributed to a supportive market making backdrop relative to a year ago. Looking forward, our economists continue to expect global GDP growth in excess of 3% over the next two years.

In the US, the fourth quarter provided a backdrop of solid growth, evidenced by steepening yield curve and continued strong consumer sentiment. Conditions remain supported by the Federal Reserve's three mid-cycle rate cuts in 2019. Going forward, we expect US growth to continue to run at about 2%, given robust labor markets, low inflation, and strong wage growth.

In Europe, growth continues to remain relatively low, given manufacturing weakness. However, in China, trade headwinds appear to have moderated with both monetary and fiscal stimulus supporting growth estimates of