The Goldman Sachs Group, Inc. (GS) Earnings Call Transcript & Summary

Okay. Good morning, everyone, and thanks for joining our next presentation from Goldman Sachs. Joining us again is President and Chief Operating Officer, John Waldron, [ President John ]. John assumed his current role about 2.5 years ago. And along with CEO, David Solomon; and CFO, Stephen Scherr, are executing what is increasingly looking like a remarkable level of the Goldman franchise. Stock is up almost 60% since they took over, significantly outperforming broader markets. Prior to his current role, John has held many leadership roles in Goldman, including the Co-Head of Investment Banking division as well as leadership roles in the Financial Sponsors Group and Leveraged Finance. So I'll pass it over to John, who'll give a short presentation. And then we'll virtually sit down for Q&A. So welcome, John. Thanks again for participating at our conference, and over to you.

Thank you, Christian. It's good to be with you again. I wish we were in person. I'm looking forward to next year's conference where we -- I assume we will be in person. I'm really pleased to be with everybody today to review the progress we are making at Goldman Sachs and executing across our strategic priorities. We continue to have great confidence in our ability to deliver for our clients, generate strong and consistent returns for our shareholders and meet and exceed the goals we laid out at our Investor Day back in January 2020. As we've indicated, our medium-term targets are not the limit of our ambition. Our confidence derives from 3 primary perspectives. First, we are absolutely executing from a position of strength. Building upon a long-established franchise that has been steadily improving and diversifying its revenue mix. And second, we are accentuating and investing behind the competitive advantages that differentiate Goldman Sachs. In particular, our global presence, our deep client relationships and our exceptional talent. And third, we are scaling our growth initiatives to achieve our longer-term goal of generating sustainable, mid-teens returns. If I could turn your attention to Slide 2. We have been clear that a key pillar of our growth strategy is building a more diversified and durable revenue profile over time. This process has been underway at the firm for a number of years. As evidenced by the 9% compound annual growth rate in our fees and net interest income since 2016. As you can see from the graph on the right of this slide, our business is broadly diversified across our 4 segments. We generated substantial earnings over that time frame, resulting in approximately $80 a share in book value growth, strong evidence of the underlying earnings power of this firm. We benefit from an incredible collection of franchise businesses, each with significant room to grow and the ability to further contribute to an acceleration in our underlying earnings power. Let's now move to Slide 3. We set out 3 key pillars of our strategy at our Investor Day. Executing upon each of these pillars is pivotal to achieving both our medium-term goals as well as our longer-term ambition. To remind you, our pillars are growing and strengthening our existing market leading businesses, diversifying in the new products and services and increasing the operating efficiency of the firm. We continue to see measurable success as we execute on this plan, and we remain completely committed to our strategic direction. As the Chief Operating Officer of the firm, it is critical to me that we hold ourselves accountable for the goals we have outlined. And to that end, we are regularly tracking approximately 30 firm-wide KPIs as well as several additional business level metrics to measure our progress. We have a deep and extremely experienced leadership team that is executing across each of these metrics, and we remain focused on the rigor, the transparency and the accountability required to deliver on these goals. I am very encouraged by our progress, and I'm pleased to see us running on track or even ahead on the vast majority of these KPIs. And we remain committed to sharing our progress in delivering on these important underlying indicators over time. Turning to Slide 4. Our strategy is firmly centered around executing for our clients. We remain focused on delivering One Goldman Sachs across our broad client franchise, building long-term, trusted advisory relationships, where we leverage the comprehensive capabilities of Goldman Sachs to drive better outcomes for our clients. We know that when we deliver enduring value to our clients with a long-term orientation, our franchise thrives and our performance follows. We launched One Goldman Sachs over 2 years ago with an initial set of 30 large-scale global clients of the firm. We have since expanded this program to over 100 clients and continue to receive extremely positive feedback on our ability to deepen our relationships and deliver more value. The One Goldman Sachs approach continues to pay big dividends as evidenced by the substantial improvement in our wallet shares across the franchise. In fact, we have increased our revenue with approximately 70% of the clients who have been in this program for at least 1 year. We believe that the underlying strength and breadth of our client relationships, often forged over decades, is a significant competitive advantage for the firm. These relationships are exceptionally difficult to replicate and are increasingly fundamental to driving our overall growth strategy. Our partnerships with Apple and General Motors in our Consumer business as well as with Stripe and SAP in Transaction Banking and MSCI and Bloomberg on our Marquee platform in Global Markets, are all evidence of our ability to leverage the strength of our relationships and drive our strategic initiatives. Moving now to Slide 5. One Goldman Sachs is foundational to our operating approach as a management team, underpinning our ability to harness the best of Goldman Sachs for our clients and to deliver for our shareholders. Our success here is driven by 6 key competitive advantages: our global presence, our deep client relationships, our exceptional depth of talent, our history and continued focus on innovation, our world-class brand and our preeminent risk management capabilities. As a management team, we are focused on properly harnessing these advantages to drive competitive separation in our industry. We are seeing this play out across the firm. Within Global Markets, our global presence, our depth of talent and our risk management orientation enables us to operate a truly scaled platform that provides access and execution for our institutional clients around the world in all-weather environments, while also raising capital and providing strategic advice in Investment Banking for our corporate clients as they continue to grow their businesses globally. Similarly, within Asset Management, our global reach underpins a unique deal sourcing capability, which coupled with the depth of investing talent across our platform, enables us to deliver strong returns for our institutional and private wealth client base. And the depth of our engineering talent as well as our focus on innovation drives our ability to build new platforms in Transaction Banking, Consumer and Global Markets, platforms that we expect to create further competitive differentiation over time. Let's now turn to Slide 6 and review our Investment Banking business, where we have the #1 franchise in the world. We have ranked #1 for 19 of the last 20 years in completed M&A and for 9 of the last 10 years in equity and equity-related offerings. Our reputation for trusted advice and unparalleled execution are critical differentiators in this business, and we have developed a depth of talent here that is second to none. In announced M&A, we ended the first quarter at a #1 rank with a large lead versus our next closest competitor. We continue to improve our market shares across our core franchise, and the underlying market dynamics remain extremely attractive for growth ahead. Market cap growth, which is a key driver of this business, continues to run forward, driven by economic recovery and substantial fiscal and monetary stimulus. The capital markets remain very supportive, and private capital continues to be plentiful. Unsurprisingly, as confidence in economic recovery continues to improve, we are seeing a measurable pickup in merger activity, which we expect to be a force multiplier across our business. This underlying strength is felt in our backlog, which is running at record levels as of the end of the first quarter. And importantly, we are seeing progress in our footprint expansion efforts, where we have expanded client coverage by approximately 2,700 companies since 2017, further strengthening our market-leading position and enhancing the growth profile of this business. And we continue to see tremendous early signs of progress as we grow our Transaction Banking platform, where we now have over 250 clients with greater than $35 billion in deposits in just over a year since our launch. We continue to focus on adding clients to the platform, while steadily increasing our deposits that are operational or fully insured, which will be a key indicator of our ability to drive significant value on this platform over time. Now moving to Slide 7. Let's go into Transaction Banking a little deeper. We have developed here a consumer quality digital platform for corporate cash management, and we are extremely encouraged by the client feedback and adoption rate of our offering. This platform is built entirely in the cloud, designed with a developer in mind, creating an API-driven product that allows for a seamless integration into the client's ecosystem. One of the most consistent pieces of feedback we've heard from our clients was about the time it takes to onboard and create new accounts with their incumbent banks. So as we imagine our process, we reimagine the onboarding process to be 100% digital to enable account opening in minutes versus weeks, with speed, efficiency and security as key differentiators. We've also introduced virtual integrated accounts, which allowed clients to open and close accounts in seconds. Our systems are fully integrated and communicate with each other, eliminating the need for clients to provide redundant information. And we've heard very favorable responses to the ease and simplicity of our onboarding process, so much so that we are now examining how to leverage this capability across other areas of the firm. Our intelligent payment solution is also a big differentiator with greater than 99% straight-through processing to 125 currencies. In addition, we are focused on building strategic partnerships to embed our platform into others' ecosystems that enable us to access markets beyond our traditional reach. The best example of this to date is our partnership with Stripe, where we expect to serve millions of SMEs through the broad Stripe platform. We are working on additional strategic partnerships to continue to broaden our platform as we are increasingly levering our corporate franchise to become a partner of choice in the payments arena. We will absolutely have more to say about this in the months ahead. Turning now to Slide 8 in Global Markets, where we are seeing continued progress in achieving our key goals. First, to improve our wallet share position; second, to grow our client financing revenues; and third, to optimize our resource consumption. The global scale of our business remains a key differentiator as we see continued consolidation across the industry. Over the last 10 years, the top 3 firms have gained approximately 8 points of share as institutional clients consolidate their wallets with firms that can deliver a global, broad and deep capability. We continue to see very strong momentum across our client franchise, where we have gained approximately 160 basis points of wallet share since our Investor Day. Goldman Sachs is now firmly the #2 ranked Global Markets firm based on revenue wallet share. These results demonstrate that our strategic initiatives are paying real dividends. We are now in a top 3 position with 64 of our defined top 100 institutional clients, up from 51 at our Investor Day. We are continuing to strengthen our client financing presence with significant momentum in our Prime franchise as well as in derivatives and mortgages as we lean into supporting our clients' growth. We are leveraging our ability to dynamically manage our balance sheet while deploying our risk management capability, a great example of a true One Goldman Sachs approach. We are often asked to comment on the overall wallet size prospectively. Rather than speculate on the future activity levels, we prefer to focus on our share gains and a fundamental belief that our continued investment in improving our client franchise will support our outperformance over time. For example, even assuming the industry returns all the way back to 2019 activity levels, consolidating our share gains would yield an incremental $1.7 billion in revenues for our Global Markets business. Moving now to Slide 9. Let's put some numbers around the earnings power of these businesses over a longer period of time. While there is certainly some variability in the results, we see a stable core here that has been bolstered by growth in more durable revenues, largely coming from financing activities with most of the variance weighted to the upside based upon market activity. We remain very confident in the underlying durability of this business going forward. Our confidence stems from the well diversified mix of businesses within our broad Global Markets franchise. First, our financing business. A key source of stability and net interest income with $4-plus billion of revenues in each of the past 3 years. This business has grown at a 5% CAGR since 2011, and we feel great about our strategic focus to build even deeper financing relationships with our client base. Second, the stable core is reinforced by our recent wallet share gains, which I spoke about, which we are fully committed to maintaining and expanding even further as we continue to build the underlying durability of the franchise. And third, from that solid foundation, we see meaningful contributions each year from our 2 large intermediation businesses. Our FICC intermediation business tends to generate approximately $8 billion in annual revenues, but not less than $5 billion and as much as $10 billion on the upside. And our equities intermediation businesses tend to generate approximately $5 billion in annual revenues with upside to roughly $7 billion in revenues. So even if you take the minimum revenue from the intermediation businesses over this 10-year period as a baseline and add the financing run rate plus the market share gains, Global Markets revenues are at least $15 billion annually and earn double-digit returns. Beyond this baseline, our business has also shown the ability to capture the upside in stronger markets and generate returns that meet or exceed our overall targets. Now turning to Slide 10. Our Asset Management business possesses a unique ability to offer a scaled, full service, global, broad and deep platform across all major asset classes. Over the past 2 years, we worked hard to integrate our traditional liquid active business with our broad-based, direct alternative capabilities into a unified Asset Management franchise. This is a global platform with 4,700 professionals, $2.2 trillion of assets and an ability to provide a comprehensive asset allocation mix for our client base. We are raising significant new assets through insurance, pension and sovereign wealth mandates as well as through retail distribution. And our pipeline for OCIO services continues to be very strong. All suggesting we can drive further growth in traditional assets alongside our efforts to raise alternative funds. We are embarking on a shift towards raising significant third-party alternative assets where we expect to be a market leader. Our over 30-year investing track record, coupled with our long-standing global relationships with asset allocators, gives us great conviction in our ability to execute upon our stated goal of raising $150 billion in gross commitments for our alternatives offerings and $250 billion in traditional organic net inflows. Since 2019, we have raised approximately $53 billion in gross commitments to our alternatives product and seeing $75 billion in traditional organic net inflows, putting us well on our way to achieving these goals. We continue to see a secular shift towards alternative assets as investors increasingly seek higher yields, better returns and a greater ability to generate outperformance against their benchmarks. In addition, we continue to progress on our objective to run a more capital-efficient model with less balance sheet investment dedicated to this activity in favor of a more funds-driven strategy. We have announced or closed on the dispositions of over $4.7 billion in assets since the Investor Day and have a clear line of sight for an additional $3 billion in asset sales through year-end 2021. Now moving to Slide 11. These initiatives are driving a meaningful and purposeful shift in our business model as we remix our balance sheet towards less capital-intensive investments, such as private credit, and grow our fee-based revenues. As an example, our firm-wide management and incentive fees are up 13% on a year-over-year basis. And as these near-term gains related to the balance sheet harvesting I referenced normalize, we expect to see our management fees continue to increase driven by the fundraising and deployment of alternative capital. Importantly, the growth in our alternative assets will enable us to drive a better fee mix in this business as they garner higher fees than our traditional offerings. For example, our new alternative funds earn average fee rates of approximately 100 basis points, which will help us continue to grow the management fee basis going forward. Let's now turn to Slide 12 and shift gears to Consumer & Wealth Management, where we are focused on driving revenue growth as well as better margins. Wealth Management is a large and highly fragmented market where we see significant growth potential with very high returns on capital for Goldman Sachs. Our brand resonates very strongly in this space. And over the last 20-plus years, we have developed a proven ability to build enduring, trusted advisory relationships. Our ultra-high net worth franchise is truly one of the crown jewels inside this firm. We have a very well-established presence with the wealthiest clients in the United States and a strong desire to grow our presence internationally. Following a slowdown in the depth of the pandemic, we have now resumed a more ambitious hiring plan to further build out our presence in the Americas as well as to grow our platform in Europe and Asia. We have seen approximately 50% year-over-year increase in our global hiring of client-facing professionals. While continuing to grow our ultra-high net worth franchise, we also see a significant opportunity to leverage the foundation of our corporate relationship network to build a more meaningful, high net worth business focused on clients in the $1 million to $10 million investable assets segment. Following our acquisition of United Capital in 2019 and the successful integration with our existing Ayco platform, we now have a more comprehensive capability rebranded as Goldman Sachs Personal Financial Management, or PFM, to offer our corporate clients holistic Financial Wellness solutions for their entire workforce. While we are progressing in our pursuit of a corporate channel opportunity, we are also experiencing substantial referrals between our ultra-high net worth platform and the PFM high net worth channel to the tune of $9.5 billion in total AUS opportunity. And in our Consumer business, we continue to be very pleased with the progress we are making in driving substantial deposit growth with over $100 billion in balances now on our platform. We also continue to work to build out the offerings across our digital platform. The addition of our credit card partnership with General Motors complements the growth in our Apple card as well as the recent launch of our Marcus Invest capability, where we have opened more than 10,000 Marcus Invest accounts since February of this year, 70% of which are with existing clients. A great example of the progress we are making in building a cross-product, digital bank capability. Moving now to Slide 13. I want to further unpack the significance of the opportunity we see across the corporate channel in Wealth Management. We have added 11 corporate clients to our Ayco platform year-to-date, bringing the total number of corporates out onto the platform since our Investor Day to 44. One recent mandate really signifies the type of program we are delivering. Earlier this year, we launched a new top to bottom Financial Wellness program in partnership with a large Fortune 100 retailer, the culmination of a multiyear effort that originated from a strong investment banking relationship and has since expanded to include a comprehensive Wealth Management solution. This program will provide financial solutions across the entire employee base from the C-suite all the way down to sales clerks on the floor with tailored offerings and technology-enabled solutions that meet the needs of each group of employees. The revenue opportunity here tends to be modest initially, but the real long-term opportunity presents itself as we build trusted relationships and become an even more important partner in planning for the retirement and financial wellness for more employees over time. Our experience shows us that the revenue opportunity can double or even triple 5-plus years out as these relationships deepen. Today, Ayco PFM works with roughly 50% of the Fortune 100 and roughly 1/3 of the Fortune 500. Certainly an impressive foundation, but we see meaningful opportunity for growth ahead as we expand existing relationships beyond the traditional executive counseling offerings and work with new clients to offer holistic programs for their entire workforce. Turning now to Slide 14. As I noted earlier, we are seeing continued momentum across all 4 of our business segments. Over the past year, we have demonstrated our ability to deliver on our medium-term return targets. We are now scaling our new businesses to drive our returns even higher over time. We also remain laser-focused on our efficiency initiatives. And we now estimate that we will extract approximately $400 million in incremental efficiencies beyond the medium term, the result of our accelerating investment in automation capabilities as well as the continued execution of our location strategy. These efficiencies will be redeployed to invest in building and scaling our new businesses. Let's now turn to Slide 15 and spend a minute on these 4 growth initiatives, each representing a large addressable market. We're capturing modest market share, delivers meaningful contribution to the growth of our earnings power and increases the fundamental durability of our overall return profile. In Transaction Banking, as an example, we are competing in a $150 billion marketplace in the U.S., Europe and Japan and an over $70 billion marketplace in the U.S. alone. We are talking about $1 billion revenue opportunity in our line of sight, representing a sliver of share in this overall market. This is a business which requires minimal capital and runs typically at high margins and north of 20% returns, a great contributor to durable firm-wide returns as our platform scales. Similarly, in alternatives, we measure $7.5 trillion in private markets AUM globally with secular growth. Our $150 billion in third-party asset growth, coupled with balance sheet reduction, generates meaningful growth and more predictable and stable management fees, which we expect to support returns above 20% for this segment. At scale, each of these businesses will be ROE accretive, and we will continue to invest to capture this growth over time. And finally, on Slide 16, we are very pleased with the progress we have made in strengthening our core franchise by improving our wallet shares, broadening our client footprint, delivering One Goldman Sachs and operating our firm more efficiently. At the same time, we are investing for growth in order to build new platforms and introduce new revenue streams that carry accretive returns at scale, further diversifying and strengthening our earnings profile. We have made substantial progress over our tenure and have managed through the challenge of the pandemic effectively. Now the path to more durable mid-teens returns is clear for Goldman Sachs. We will continue to focus on executing our strategy and leveraging the key competitive advantages that make our firm special as we work to deliver for our clients as well as for our shareholders. With that, I'll turn it back to you, Christian. Thank you.

Great. Great. Thank you, John, for the presentation. Maybe let's just step back a little bit here. It's almost 2.5 years since you, David and Stephen took over top management. As you've noted, there's been a lot of progress around executing on the strategy, and really achieving very early on some of the medium-term targets. I guess how do you, big picture-wise, think about how far along you are in terms of Goldman Sachs' strategic transformation? And as I think about incremental opportunities from here, how do you think about growth initiatives as strengthening the actual core franchise?

I appreciate the question, and I've tried to send the message in the presentation that we feel great about the progress we've made, particularly in strengthening our core franchise. There's no question that our core franchise is a lot stronger than it was 2.5, 3 years ago. And we've made real progress in our growth initiatives. So we've achieved a lot of what we set out to do on the core, and we've made real progress in building the foundation for growth, and we've made real progress on our efficiency initiatives. So on all 3 of the kind of key pillars of the strategy, we're doing very, very well. Our conviction on our medium-term return targets is very high, and we're trying to make that clear as we communicate. And then we think about where we go from here. We think about creating more durable, mid-teens returns over time. And that obviously requires the growth initiatives to really kick in and to generate meaningful contribution and become more at scale. So the focus now is to continue to invest in the core, continue to garner progress with our client franchise, continue to grow our financing capabilities, continue to build more NIM generation, continue to invest in the platforms that make that core stronger and really plow resources into the growth initiatives to make sure that we're getting to the place we want to get to, to drive the contributions at scale from those 4 key areas, which, as I said, our Transaction Banking, alternatives, Wealth Management & Consumer. All of that happening with more resource optimization to fund a lot of that growth. So we're a long way through the first phase, if you will, of the transformation, which was heavily focused on the core and setting the foundation for growth. The second phase, you might imagine, is going to be more focused on really scaling up those growth initiatives while continuing to progress on the core of funded and focused with a lot of resource optimization under the covers to make sure that we're doing our part to run the firm as efficiently as we can.

How about macro backdrop with optimism in the U.S., with vaccine rollouts and lots of stimulus, but maybe some unevenness broadly out globally? So maybe how -- what are some of the risks that you're focused on and you're monitoring daily?

Well, like a lot of people, we're pretty bullish on the recovery. And I think we've been fairly consistent in being a predictor of a V -- more of a V-shaped recovery, particularly in places like the United States and China, which are emerging stronger coming out of the pandemic. There's no doubt that the vaccine trajectory is having an incredibly positive implication for economic growth in most of the world, not in all parts of the world. And the combination of vaccine trajectory with stimulus -- extraordinary stimulus, both monetary and fiscal, is having tremendous kind of booster shot impact on economic growth. So you're seeing rising consumer confidence, rising consumer spending. You're now seeing increased business confidence, I'd argue increased CEO confidence. Business investment will continue to grow. Demand recovery is really strong right now. Consumer spending in the United States is now exceeding pre-COVID levels. So you're seeing tremendous snapback in demand. Not surprising. We had an enormous demand shock and now we're kind of -- we're getting that demand recovery that you might have predicted if you thought that we could get to some vaccination level where the pandemic feels like it's more in the rearview mirror. Our GDP forecasts are healthy. We're at 7% in the U.S. and 6.6% global for 2021, 5% for 2022, which might be an even more important forecast because that shows that you can have really above trend growth well into 2022 on a global basis. So we -- we're constructive, for sure. I would say to your question, we're watching some indicators very closely because there are potential cross currents to that underlying strength. The vaccine trajectory would be one. We're certainly seeing great vaccine trajectory in places like the United States, Western Europe, less so in the emerging markets, and that's got to be concerning. If the emerging markets don't develop vaccination penetration at a better rate soon, we're going to start to see some real disparate outcomes, which we worry about and that can have negative implications for supply chains and for global growth. No question, we want to pay close attention to the variance to make sure that the vaccines are dealing with the variance. That's an important indicator for underlying sustainable economic growth. Like a lot of people, we're paying very close attention to inflation and the implications inflation would have on the interest rate picture on the yield curve on underlying economic growth over time. Supply chain imbalances, inventory cycles, we've tended to believe that those are more temporal imbalances and that inventory cycles can change quickly, and then we'll end up in a more equilibrium environment where you won't have runaway inflation and you will have a more balanced economic growth picture, but there's risk, obviously, to that. We worry a bit about market-based leverage. We focus on speculation in the markets, making sure with all the stimulus in the market that we're not seeing signs of excess speculation, excess leverage, which when people change their mind and sentiment shifts can create lots of imbalance. The last thing I might say would be geopolitics, plenty of geopolitics to worry about. And I think that has had impact on the markets and will continue to have impact on the market. So there's lots to worry about, lots of indicators to focus on. But generally speaking, our bias would be very positive.

Okay. Shifting to your markets businesses. You've had a couple of -- more than a couple of pretty exceptional quarters. If I'm reading your body language correctly, you sound still pretty bullish until now. So what's activity like in the markets and Investment Banking businesses so far in the quarter? There's been some big announcements in your ex business that you run, the Investment Banking business. And it seems like even Prime continues to be strong. So just give us a sense of what activity feels like quarter to date.

Sure. You're reading my body language correctly. We're seeing tremendous activity. The activity is coming in the capital markets, right? So there's very strong issuance, equity capital markets, debt capital markets. There continues to be a fair bit of activity in institutional trading activity and positioning activity, I would say not at the first quarter levels, which none of us felt were sustainable but the activity levels are still high. There's plenty of cross currents that institutional clients are wrestling with, many of which I just went through. What's your picture on inflation? What's your picture on interest rates? What do you believe in terms of economic growth? What do you think the Federal Reserve or the Bank of England or the ECB will do in terms of tapering policy that allow for lots of repositioning activity? So I think there's a bit of a tug of war, the way I see it, on the problematic inflation case versus the more constructive reflation case, and that's generating a fair bit of repositioning. So those activity levels continue to be very, very good, albeit not at the pace of the first quarter. On the capital markets side, while we're seeing a transition in equity capital markets from what have been more private capital, SPAC-driven activity, we're seeing more corporate-led activity, more traditional IPO activity. I think that's a good trend. I think that's a healthier trend. And I really believe that we're going to see a significant acceleration in merger activity. Merger activity absolutely is a multiplier for capital markets. So if we see corporate-led M&A really become a bigger accelerant of broader merger activity, a lot of that M&A will get financed in the equity capital markets and the debt capital markets. And you'll see an even further acceleration. And just remember, capital markets activity is typically highly correlated to GDP growth. And so if we're going to see the kind of GDP recovery, that will be funded a lot by the capital markets, particularly in the United States, which is a very capital markets predominant economy. So that's an underlying driver that I think is kind of undeniable at this point.

Great. Let's shift about -- to capital deployment. I think it's been -- of course, financial crisis, the narrative is essentially deleveraging and returning capital, I guess, there just wasn't demand for it. And I think you and your fellow industry participants and the -- we had a position of actually having a lot of client demand for -- with capital. But as you mentioned there's a lot of risks as well. So just talk about how Goldman and you and the management team think about deploying capital to support clients, particularly in this sort of dynamic market backdrop.

Okay. Sure. So as I alluded to, our core businesses are performing very well, and we're seeing tremendous opportunities to deploy capital in support of our client franchise. And those opportunities are coming at very good returns. So there's every reason to want to be supporting the client franchise and generating good returns in doing so. And as I talked about in the presentation, we have leading shares. We have a desire to take more share. We're running a very client-centric firm. We want to support our client business. And right now, supporting our client business is not only the right thing to do, it's an attractive thing to do. So you're going to see us, particularly with some of our peer firms, possibly pulling back with some constraints on capital. You're going to see us continue to lean forward to support our business and really deploy capital across our core franchise, where we're seeing returns accretive to our ROE targets. Our framework on capital, I'd like to believe, is very clear, but let me try to restate it to ensure that it's clear. We prioritize capital deployment in our business. And right now, that's a very attractive thing to do. We are focused on increasing our dividend. We believe our dividend has room to run, and we are focused on increasing our dividend as we can. And we measure stock buyback against the overall returns in the business, and it's kind of under that framework that we're going to think about how we measure our capital return. We have very strong returns in the business. You're going to see us pull back a little bit on stock buyback and deploy that capital in support of the client franchise at very accretive returns. Given the opportunity set we see across the businesses right now, as I've described, you should expect we'll buy back less stock this quarter in favor of supporting our client franchise. We believe that's the right thing to do. It's also an attractive financial return in the context of how we think about our capital deployment.