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

Good morning, everybody. I'm Susan Katzke. I cover the large-cap banks at Crédit Suisse. And on behalf of our Financial Services team, I'd like to welcome you to our 23rd Annual Financial Services Conference. Back in-person, good to see live human beings in the room. Back in Florida, and it's warm out. Thank you all for joining us. Over the next couple of days, we're going to look forward to hearing from 60-plus corporate participants and walking away with a clear picture of prospects across the financial services industry. I think only one thing is certain, that there's never a dull moment in banking. So back again at the start of this conference. For as many years as we posted this conference, I'm pleased to have Goldman Sachs up first. And we have with us Goldman Sachs' CEO, David Solomon. David, you really need very little in the way of introduction, and we much rather hear your strategic update that we've all been waiting for. So without further delight, let's get started.

So thank you, Susan. Wow, that sounds loud. And good morning, everybody. I, too, am back and happy to be back here in-person. I do remember, 2 years ago, sitting in a conference room here with Susan and some others at dinner in late February, where the conversation was dominated on what the journey would be given the acceleration of COVID. And I don't think any of us could have imagined the twist and turns we've been on over the last 2 years, but we're here, we're in-person, we're moving forward. Things are looking up, although there's certainly a lot going on in the world that we can talk about. But today, I want to focus on Goldman Sachs. I want to focus on the progress we've made over the course of the last 2 years. And so I'm going to run through a brief presentation, and then I will take some questions from all of you. First, 2 years ago, in early February 2020, we laid out a strategic plan at an Investor Day, the first Investor Day this firm has ever had in its 150-year history. And we laid out a strategic plan to invest and to grow our businesses, find ways to diversify our products and services and shift the business mix over time and operate the firm more efficiently, so we could drive higher durable returns for shareholders. And I would just say, 2 years in, the world has twisted and turned, but our confidence in that strategy and the fact that the strategy is working is as clear as it's been. We feel great about the strategy. We're executing on the strategy. And we're very confident about our ability to move forward and continue to deliver very strong returns for shareholders. If you look over the course of the last 3 years, we certainly didn't anticipate this market environment, and the market environment provided quite a tailwind. But we've really been able to grow our book value and deliver higher returns. If you look at the chart here, since our Investor Day in 2020, looking at '19, '20 and '21, you can see the ROEs we delivered for shareholders, you can see both pre and post the 1MDB litigation. And while we don't believe that last year's ROE is sustainable in any way, it added significantly to book value, and we'll reiterate our targets and our ability to drive returns in just a moment. But I want to focus on the chart on the right on book value growth for a moment, because book value growth to us underpins the long-term sustainable value of any financial institution. And you can see here, over any period of time, 1 year, 3 years, 5 years, 10 years or since our IPO, our book value growth, as compared to the leading peer, not the average of peers but the leading peer, has continued to deliver for shareholders. So while there are aspects of our business that might not be as predictable as some every single year, over periods of time that are very reasonable, we continue to steward capital and grow that book value on a very, very constructive way. At our Investor Day, we laid out a set of targets. And one of the things I remember about that Investor Day 2 years ago, and by the way, in some ways, it seems like it was 10 years ago, but 2 years ago was there was a lot of skepticism around the targets we laid out and what we thought we could accomplish. We laid out a 13% ROE target. We laid out a 60% efficiency ratio. We talked about a $1.3 billion expense plan, efficiency plan and a 13% to 15% (sic) [ 13.5% ] CET1 ratio. And so when you look at our progress, obviously, we've way exceeded the returns. We're very comfortable with that efficiency ratio at target. We've realized over $1 billion of expense efficiencies, and we'll finish up on that target during 2022. And we're operating with a higher capital ratio, but very comfortable with our return targets given that capital ratio, and I'll talk a little bit more about capital in a moment. When this management team took over the firm 3.5 years ago, one of the things that was centered to the way we thought about the strategy of the firm was how the firm focused on clients, the client centricity of the firm. And we evolved and developed this One Goldman Sachs philosophy. The belief, and I deeply believe this through my experience over multiple decades in this business, if you invest in your clients, you build relationships with your clients, if you deliver for your clients and treat your clients well, if you build trust with your clients, over time very good things will happen. And so we thought a lot about this client centricity. And one of the things that I want to amplify here on this slide is that client focus has made a big difference in our performance over the course of the last few years. We have grown our wallet share in Investment Banking by 360 basis points. We've grown our wallet share in Global Markets by 250 basis points. But in addition, given the strength of our franchise with corporations and institutions, we've gotten much better as an organization in figuring out how to use that network of relationships to really drive a bunch of our growth initiatives. So that One GS culture is helping us in alternatives fundraising. We've done over $100 billion in just 2 years. When you look at corporations on our Ayco, Goldman Sachs Ayco platform, these are our corporate clients, and we continue to add corporate clients to that platform and we think that's a big opportunity for us continue. When you look at the rollout of transaction banking, 90% of the clients that are on to our platform are existing banking clients. And when you look at the partnerships we have in consumer, our relationships make a huge difference in developing those partnerships. I do not believe we'd have the partnership with Apple without a 30-plus-year relationship, an enormous trust at the top of those organizations. And so we really feel like we're unlocking that franchise to help us drive gains across the firm. I want to talk for a moment about Investment Banking and Global Markets. We generally don't talk about these two businesses together. They are 2 of the 4 core platform businesses. But our Investment Banking business, our leading Investment Banking business would not be the #1 Investment Banking business if we didn't have the #1 or #2 Global Markets platform. That Global Markets platform makes our Investment Banking business better. And we would not have the #1 or #2 Global Markets platform if we weren't the leading investment bank, if we didn't have the biggest equity franchise, if we didn't have the biggest M&A franchise. These two businesses together are very powerful virtuous ecosystem that we think is very important. Now when you look at the performance of these two businesses and the way they operate together, our ROE growth and improvement in these businesses over the last 3 years has way outpaced the peer average, and it's led to a lot of book value growth on a relative basis versus the peers. And I just want to remind everybody that our peers commit different structures, different businesses, significant capital to this. And so our ability to continue to maximize these synergies and outperform on a relative basis, it might be harder to predict exactly what these businesses do every year, but they relatively perform better. There's a massive earnings base underneath this, and it continues to drive real book value return. When you look at Investment Banking, and you can see here a period of 2010 to '16, '17 to '19 and '20 to '21, we've obviously grown this business very significantly. Some of this is based on the environment. There was a big tailwind in Capital Markets activity. That won't continue in perpetuity. But in addition, we actually significantly grew the business because the opportunity set that exists in this business on an ongoing basis is meaningfully bigger today than it was 5 to 10 years ago. There are more companies that we can put footprint against, and we do a very good job of doing that. We've significantly expanded the footprint of companies that we cover. One of the reasons why is there a lot more companies with market caps of $500 million to $3 billion than there were 7 or 8 years ago. And while that might move around, as long as you believe in secular growth in the economy, over time that footprint should grow, and we're very good at putting resources against that footprint. I think there are a bunch of things that are going on that are allowing us to capture share, but also, I think, our forward catalyst as you look forward in a more normalized capital markets environment. One, there's an enormous investment going into technology and healthcare, and those are two spaces that are going to continue to need an enormous amount of investment banking services broadly, regardless of the environment, and we're extremely well positioned there. The secular activity across sponsor capital continues to be very significant. We'll come back to that in Asset Management. But we started investing 10, 15 years ago in making sure we had a premier financial sponsors franchise. And our franchise covering financial sponsors is second to none, and we're benefiting from that secular change. We also think that scale matters everywhere in business. And there's going to be continued consolidation, continued repositioning activity. And the environment that we're shifting into, given we're moving into an environment with probably above trend inflation for a period of time, actually is going to force companies to think about their strategic positioning differently, and we'll benefit from that. Climate transition is a massive opportunity all companies are focused on it, and it allows for extraordinary dialogue with companies at the CEO level, because it's super important to any company to figure out how they'll transition accordingly. There obviously are big opportunities in China, but lots of complexity with China. But these are big catalysts that we think over time continue to sustain above market cap expansion growth in this business just as it's existed over the course of the last 25 years. And again, I want to highlight, we have been the leading M&A adviser for almost every year in the last 25 years. This is an extraordinary franchise, where we're just extremely well positioned. And actually, the same as with Global Markets, it's getting harder for people to compete at the fringe. The scale matters more in these businesses just as it does in other businesses. I want to talk for a moment about Global Markets. And I remember back in Investor Day when we laid out our belief that we could drive double-digit returns in this business, there was a lot of skepticism. And I know, one of the questions I'm getting constantly now is what's the forward in Global Markets. I'm not standing here saying that this year is going to be the same as last year. But I'm trying to create a frame that we can express it to you that kind of gets people comfortable that while we can't predict every year what the opportunity with our clients will be, there's a durable business underneath here in almost any environment that really delivers for the firm. And again, this ecosystem between markets and banking is very, very important. This chart here lays out, in the first bar, the average financing revenues in the Global Markets business. We have been CAGR-ing that financing business at 8% over the last 10 years. We told you on our Investor Day, this was a strategic focus to grow it and we're continuing to grow it. That is business that you can model, that you can predict that you can have some confidence around. You can see the $2 billion of wallet share gains that we think are real and sustainable because of our client-focused strategy. In the box in the middle, and this is the stuff that's hard to predict, is FICC and equities intermediation. What the bars highlight is the range of revenue in every single year over the course of the last 10 years from 2012 to 2021. In FICC, the low was $5 billion, the high was $10 billion, the median was $8 billion. In equities, the low was $4 billion, the high was $8 billion, the median was $5 billion. If you take the bottom, the $5 billion in the floor and you add it to the financing revenues of 5%, which you're going to CAGR, we think around that 8% range. The wallet share gains, we actually still think there's a little bit of upside, you're greater than $16 billion base business. And at that level, we are confident we can deliver double-digit returns. We -- I'm not saying here. I'm not putting out a message, and I want to be crystal clear about this, that we think this business is $16 billion this year. We believe it's going to be meaningfully bigger than that this year. But I'm trying to find a way to help people understand that there is a base durable business here. And one of the things we're really good at is when there is an opportunity set with our clients, capturing it. And again, this business, scale, technology investment, the way you use technology to deliver for clients, so important. And the big are getting bigger and more powerful, and the people at the margin are having a harder time competing. That's one of the reasons why the wallet share gains are coming. So again, there are a bunch of catalysts here that we think can continue to help us. I think I've touched on all of them. And we're also very focused and we think very good on resource optimization. If our clients aren't as active here, we can be nimble and adjust the RWA composition of this business. But if clients are active and they're producing returns like they produced last year, like they produced in 2020, I think, you, as shareholders, want us to allocate capital to those accretive returns and grow our book value. I want to shift now to Asset Management and Wealth Management. And again, I'm going to talk about the two businesses where synergy is, again, for the firms focused on clients. Our ability to work across these franchises and really drive cooperation inside the firm is key to our success. The fact that we have an extraordinary Asset Management platform is helping us in our Wealth Management business. We are the top -- we are the #5 active asset manager in the world with $2.8 trillion of assets under supervision. We have the premier ultra-high net worth franchise with greater than $1 trillion assets. But one of the things we're now doing is laying out and growing the ability for many more affluent people at different levels of affluence to access our Wealth Management platform. We also today are the #5 alternative asset manager with $425 billion of alternative assets. We believe, over the next 5 years, that the capital allocated to the alternative space, and this is actually outside research, this isn't just an opinion, will grow by 70%. As an at-scale leading player, we should capture a significant share of that growth, and we're extremely well positioned to do that. And I look at the way these businesses are valued, we have a huge platform inside the firm that is going to continue to grow with that secular growth. And so the integration of all this and our ability to integrate these platforms is really of great strength. We are in all products global, and we think very well positioned in the active space. When you look at Asset and Wealth Management, one of the reasons we're so focused on the growth of this business is obviously growing our mix of fees. And we understand, and this has been core to our strategy, that we are trying to broaden the base of businesses so that the mix changes, and there's more of a fee mic in the firm. Now we would have made more progress on that over the course of the last 2 years if it wasn't an extraordinary opportunity in the Capital Markets business, and I like having that problem. But if you look here, we've grown assets under supervision from $1.9 trillion to $2.8 trillion, and we've compounded the fees over the last 3 years by 12%. As you look forward, I think there are a bunch of forward catalysts here, our Goldman Sachs Ayco platform and the growing ecosystem of workplace health and what corporations want to do to help their employees, not just the wealthy employees, but all employees, access financial services and wealth as a big trend where we think we're very well positioned. ESG and impact strategy is going to have an enormous growth impact, and our acquisition of NNIP accelerates our capabilities in that area. We really benefit from the fact that we have an enormous proprietary product offering, but we also have an open architecture system. And our clients like the fact that they can be in either ecosystem when we provide that access. We also have the #1 platform in separate managed accounts, the #1 platform, and we continue to see opportunity to grow from there. And we talked about third-party funds -- third-party alternatives and that strategy. So we continue to think there are a number of areas here that can continue to allow us to grow at scale. Now in the context of that, I want to update a couple of targets that we had put out at our Investor Day 2 years ago and add a couple of other targets that we think will help guide you on our forward progress. The first is we had laid out in our Investor Day that we thought we could drive $250 billion of organic traditional long-term net inflows into our platform by 2024. We're now updating that target to $350 billion from $250 billion. In addition, we had laid out that we thought we could raise $150 billion in alternatives by 2024. We're now updating that target to $225 billion based on the experience we've had so far. In addition, we're laying out a new target of greater than $10 billion of firm-wide management fees by 2024. And of that $10 billion of firm-wide management fees, greater than $2 billion of it will come from alternatives. And so those are two more new metrics and targets that will help guide the progress we believe we're making. I want to shift for a minute and talk about Transaction Banking, which we continue to think is a great medium and long-term opportunity for the firm. I've always talked about the addressable market here. It's $150 billion TAM, which is significantly larger than Investment Banking. The largest competitor has about 7% share, so it's fragmented. What I'm very excited about is I think we've built a real disruptive digital platform. And I am constantly hearing from our clients, once they see the platform or they get on to the platform, how differentiated the technology is and how it's changing the way they think about the capabilities that they should have in their payment platform. You could see the client growth over the last year from 225 clients to 350 clients. The one thing I want to make sure people understand is as good as it is, it takes time for these changes to occur in corporations, but you can see that we're making progress. Our revenues in this platform for 2021 were $225 million. The target for 2024 is $750 million, but there's significant upside as we move past that and this continues to scale. The returns are very, very accretive at scale. You can see our deposit target. We passed the Investor Day deposit target. You can see the '24 target of $100 billion of deposits. Obviously, in this environment, the deposits have been worth less, but that's not a constant continuing thing. And our ability to partner with some big, big companies and use this technology around small- and medium-sized enterprises is a huge opportunity that's not as broadly factored into this yet. So again, this is going to grow. It's going to take time. We think the technology is hugely differentiated. It's a great example of our ability to build platforms with our engineering base, and we're excited about the value that this can create over time. Just 1% share in this business is enormous value to Goldman Sachs and Goldman Sachs' shareholders. And so we will continue to execute against this. I want to shift now and talk about consumer and the opportunity. We continue to see the scale of what we're doing here, again, large addressable market. We think we've built very disruptive and scalable digital platform that will continue to evolve. And as this scales, we think the returns for our shareholders are extremely accretive. The market size is obviously enormous. There's a massive disruption going on, where people are shifting to digital platforms in terms of how they consume or get involved in their finances. This business in 2021 had $1.5 billion of revenue. We're putting out a new target for 2024, trying to give you some trajectory on the business. Our revenue target for 2024 is greater than $4 billion of revenues. You can see that last year, we went from 6 million to 10 million-plus customers on platform. Our partnerships are driving a lot of the customer growth. We also are launching checking this year, and that will make progress on some of the broad service offering that we want to add. But I want to highlight that when you think about the build that's going to drive that $4 billion of revenue over the next 3 years, the build is basically in the ground. This weekend, we are onboarding the GM partnership. When the GM partnership onboards this weekend, that customer number goes up by 3 million customers. So 3 million more people are coming on the platform this weekend when we onboard GM. You can see the target on deposits at $150 billion for 2024 and loans and cards of $30 billion of balances for 2024. So this will continue to scale. We're going to continue to invest in it. We have a deep belief. And as we invest in it, it's not preventing us from delivering on the returns that we're targeting. There was a lot of discussion coming out of earnings on expenses. And so I want to just highlight again how we think about expenses. When this firm went public 20-some years ago, the comp-to-net revenue ratio was 50%, and over the last 20 years, it has decreased by 20%. It is not as relevant a number anymore. We don't manage the firm to comp-to-net revenues. We are managing the firm through an efficiency target of 60% or 40% operating margin. And we're managing it by managing our non-comp and comp expenses fluidly. We are definitely a pay-for-performance culture. When we deliver 20% book value growth for our shareholders, we are going to pay our people who drove that growth. When the performance is not as robust, there will be variable comp that goes away. When you look at the activity levels, in non-comp expenses, there's lots of variability from transaction-based expenses. When there's less activity, there's variability there. We are extremely confident and reemphasized that 60% efficiency ratio will continue to finish the efficiency savings that we outlined. But what we really want people to focus on is our commitment to this operating margin and this efficiency ratio, and that's what we're going to drive going forward. I'd also highlight that last year, the compensation ratio, net of reserves, came down another 200 basis points. And as the business mix changes, there'll be more leverage in that, we think, as we go forward. But we do have -- when people perform, we do have to pay our people, and that is part of our ecosystem. Capital Management. This was a place where the world played out differently than we expected. We had laid out a target of 13% to 13.5%. Obviously, the regulatory environment changed. And as we've thought about this over the last 2 years, we think the right way to operate here is not with a specific target, but rather to say to you, we're going to take the minimum that the regulator requires us to take and we're going to operate with a 50 to 100 basis point buffer. At the moment, our minimum is 13.4%. We're currently at 14.2%. That's an 80% buffer. Now in the context of that, we're very focused on the stress capital buffer, the SCB, and on reducing it towards 5%. That's been a part of our strategy around taking alternatives activity off balance sheet, which we've made a lot of progress on and we're going to continue to do. And we believe we can continue to focus on that to drive more efficiency and capital over time. On G-SIB, we've taken our G-SIB up. We've taken our G-SIB up because the client opportunity was enormous. So one of the reasons we drove those returns in that book value growth is because the opportunity was there. If the opportunity is not there, we have time in the way G-SIB works and the rollout of G-SIB to manage accordingly. And so that's the way we're thinking about capital, and we'll continue to think about it in that framework. So as we move forward, we want to update some of our targets a little bit, and this page kind of highlights everything that I've said broadly here. The first is we're taking our ROE target and ROTE targets for the next 3 years up. Instead of greater than 13% on ROE and 14% on ROTE, we're going to 14% to 16% ROE, which for us translates to 15% to 17% ROTE. We're reaffirming the 60% efficiency ratio target, which we continue to feel very, very comfortable with. You can see below the organic flows target of $350 billion, the gross alternative fundraising target, the management fee targets, the revenue target for Transaction Banking and the greater than $4 billion in Consumer in 2024. So as we move forward at this point, there are a couple of things I want to highlight. One, we really think our plan is working. We really think we're making a lot of progress. We think the firm is operating extremely well, and we think the client centricity of the firm and the client culture of the firm is adding to the strength of the franchise. Our people are extraordinary, and I continue to believe we have one of the best human capital ecosystems in the world of any professional services firm. We are going to continue to invest in and protect that extraordinary franchise because we think those people make an extraordinary difference with our clients and our customers. We are operating with a growth mindset to grow the firm, to grow it responsibly, but to drive consistent durable returns for shareholders. We also operate an extraordinarily innovative culture with an extraordinary engineering infrastructure that we think can continue to build great platforms that will create a lot of operating leverage for the firm over time. We think we've got very, very unique competitive advantages. Yes, we don't look exactly like everyone else, but we think there's some things that are really differentiated about our platform, our firm and our brand, and we're going to continue to invest in our brand, which we think has been underutilized. And we really have a long-term track record of driving returns and driving value to shareholders, and we want you all to know that this management team is incredibly focused on it. You've probably seen that we've done more to really align the senior leadership broadly with shareholders, and we think that, that's good for the long-term goals that we continue to try to strive for. So with that, I'm going to pause there, and I'm happy to take questions.

Okay.

Okay.

Have a seat, Dave.

Thank you.

So as you mentioned at the start, a lot has changed in the last 2 years since we sat here together. You've made, as you noted here, significant progress against the strategy, the targets that you had laid out at the January 2020 Investor Day. So why don't we take a few minutes to talk about how much has actually changed and what you've learned over these last couple of years with respect to that broader opportunity set at Goldman?

I mean, it's hard to sit here and say an enormous amount hasn't changed. But I also think with perspective, okay, when we have an ability to go forward with perspective. We went through this very, very difficult thing over the last 2 years, profoundly impactful to people individually, lots of sadness for lots of people individually, but we're coming out of it. We put a bunch of policy in place and the policy has economic impact, and we can talk about the macroeconomic impact. And I think that's the biggest thing that shifted at a high level is we're moving from an environment of very, very easy money and below-trend inflation, which really has been a long-term trend to an environment of tighter money at above-trend inflation. And we can talk about the implications for that. If you can step back at a high level, and I think when we get 5 years down the road, fundamentally, I don't think the world has changed. I certainly don't think the way we all act as interactive as human beings, the social structure society. I don't think when we get 5 to 7 years out, you're going to see enormous change. But the economic environment is different, and there's going to be a consequence to that. I feel very comfortable that Goldman Sachs can navigate in that environment very well. And we're reaffirming these returns because we think the diversity of our businesses and the things we're doing position us very well to that. There are things out there in the world that can slow that down. And by the way, not just for us but for everybody. Inflation has the risk of being a real headwind to growth. And so I think one of the uncertainties that no one can know is how are we going to navigate from a monetary policy perspective to kind of navigate and rebalance on inflation. That's an unknown. If we really screw it up, I don't mean we, if the world really screws it up, it's going to be a headwind to growth and there'll be a consequence to that. I mean, I'm a great student of the '70s, and I'm not saying we're going back to the 1970s, but everybody is used to asset appreciation in everything that we do, we might have a period of time where there's less asset appreciation. If you own equities during the 1970s, from 1970 to 1980, you owned U.S. equities. The U.S. equity is worth 50% less in 1980 than they were in 1970. Nobody remembers that. Now I'm not saying we're going back to that. But how we navigate that policy decisions from here will have an impact on the environment. When you look at our business mix and what we have, that those changes actually force companies to reposition themselves and change the way they operate, and we benefit from that. And that's -- there's some counter cyclicality over the cycle to our mix of businesses, too. So there is uncertainty. I can't sit here and tell you I know where that's all going to go. And there are environments where there'll be headwinds from our business and headwinds for other businesses, but there are also opportunities in that. But what I'm really confident of is this leadership team, this firm's ability to navigate that extremely well on a relative basis and over time, continue to grow our book value and drive accretive returns.

Okay. So if we then step back and take a really kind of narrow view on today.

On today, okay.

And talk about the current operating environment, how do you think about it? And maybe less about what's changed for Goldman and the opportunity set, but kind of in trading and banking, what is the new normal? And how does it look like?

Well, I -- new normal is a very, very tough term, and I know you know that, Susan. I can't tell you what the new normal is. But I'll tell you this, if you look at investment banking broadly, in 2022, I think it's going to still be pretty active. There's obviously going to be less equity issuance in 2022 than there was in 2021. But I think M&A activity, based on the view we have on backlog and also activity is pretty high. And what do you know, all of a sudden, activism is popping up in a very, very big way and a lot of big visible places. And you know what? That's good for our franchise and our business, too. So what I would say is the new normal for investment banking is not going to look like 2021, but it's still going to look a lot better than it's looked over the last 10 years broadly. For markets, what I would say at a high level is client activity has continued to be high early this year. It's not as high as it was in 2022, but it's still pretty active. And so the purpose of that chart was not to say that I think the new normal is $16 billion or $17 billion, I think the new normal is meaningfully more than that. It's to try to give some perspective on historical trajectory and kind of the base durability of these businesses. And so I think in the 2022 environment, today, these businesses will produce nice accretive returns for our shareholders, not like last year's, but nice accretive returns that fit with what we're trying to lay out, what we're trying to do.

That's fair. Okay. So let's go on to the next hot topic, which you acknowledged was expenses after earnings. And I want to talk about the efficiency ratio because I was probably a skeptic that you could get to 60% at January 2020 when you laid that out, and you've got there.

You weren't probably a skeptic, you were a skeptic. I mean, you told me you were skeptical.

Okay. Fine. Yes. Okay. So? That's my job.

Absolutely. There's nothing wrong with that. I just want to make sure that, that discussion is clear.

Okay. That's fair, too. Okay. So let's talk about the 60% now because it's actually gotten interesting when we think about -- less about last year where you were. But on a go-forward basis and the ability to kind of dig in and feel even more confident about that level. I'm curious, is your confidence a function of the past a lot of the heavy lift on investment spending, or when you look at the 60% now and you think about how you've migrated to more variable expenses overall, is that really now a ceiling for your efficiency ratio?

Well, I don't want to call it a ceiling. I think what we want to be held to is we think we can operate the firm with a 60% efficiency ratio, 40% operating margin. There are a couple of things I'd say. I've talked about this to many of you before. One of the things I'm really proud of that we've done over the last 4 years is we've built a really, really significant budget and planning process. This was a firm, and you and I have talked about this, this had no budget and planning process. We put a budget out in November. We look at it once, okay? And that would be kind of the last we talked about and then we saw what the year brought. This -- our budget and planning committee meets almost on a monthly basis. Monthly, Denis? It's kind of close to monthly, but they're deep-dive meetings, and we've really evolved the organization and the capacity of the leaders of the business to really think about a 3-year plan, think about all the inputs that go into it. Of course, you can't pin every variable to exactly where it will be. But all that work is leading us to be able to better plan and gain more confidence, okay, in what we can deliver. And by the way, it's a dynamic environment. So you can say, if revenues are A, it's very easy to see how you deliver on all these targets. But we also look and say, well, what if revenues are A minus 10% or A minus 15%, what would we do? Where are the levers? What can we do? How can we ensure that we can continue to move forward on what we're laying out we're doing? This is a firm that has never gone out and held itself transparently accountable. And I want to make sure as we lead this organization, we're doing an enormous amount of work to strive to understand what we're representing and our ability to consistently deliver on it. So that budget and planning process is helping us gain confidence in all of this. And I think that's a big thing that can't be observed -- can't be not observed. I think the second thing that I'd point to that probably gives us confidence is our view of what the new normal is, is better than what the consensus view is. Now I'm not saying that we're right, but I think we got a lot of good data to make assessments on that. And hopefully, over time, others will come to that view. But I think our position in a bunch of these businesses in a more normalized capital markets environment and the work we did on efficiencies, the way we're running the firm, the client focus on all these things gives us more confidence than we had 2 years ago. And so I think that plays in also. But I don't want you to think that we're somehow low balling this. We think that's a good target efficiency ratio. By the way, when I look around it, and I look at what other firms do and what their efficiency ratio is, I think that's a good -- and by the way, not just firms, other businesses in the world to be able to operate with a 40% operating margin, 60% efficiency ratio, it's a really good business.

Agreed. Agreed. Okay. So we have a couple of minutes left. I want to touch on Asset and Wealth Management, which you spoke to. You raised the targets, and they're really big businesses for you that I think get overshadowed sometimes by the strength of the market activity. So you talked about the growth, you put out the new targets. What are some of the key opportunities that help you expand that market?

Well, again, I continue to believe that scale and global matters in the asset management business, and we have that. When you look at the other people that are top 5 or top 7 or 8 in the active Asset Management space, I like our scale and global mix and footprint relative to a number of those. And so I think we have a tailwind with scale and global while some others that might fit into that category, the top 5 to 8 don't based on what their business is or the way they're positioned. So that's one. This alternatives platform, I mean, I aspire one day to get a fraction of the value attributed to Goldman Sachs that some of these alternatives platforms are getting for our alternatives platform, which is one of the great investing platforms in the world. They're not a capital that we deploy on a global basis. More and more, we're partnering with institutions who look at our footprint and our capability globally the scale of the different product sets that we have, I still think there's a lot of secular growth there. And the secular growth is not just being driven by institutional money. The access that wealthy individuals around the world are now gaining to these products, okay, and there's been so much affluence that's grown in the world is another real tailwind for the alternatives business. And so one of the things that we're focused on and finding ways that we can access those channels more broadly when we think about RIA networks and things like that. And so I think there are a lot of opportunities there, too. So I think we're well positioned. There's work to do. But I do firmly believe that if we stand this up and we get people who really focus on this, the strength of these platforms inside Goldman Sachs is not fully appreciated. And so we're going to try to give you more. We're going to try to talk about it. We're going to try to show over time the continued growth and the progress. But I think about the firm as kind of two pillars at the end of the day. We'll call the capital markets businesses, banking and global markets, which are huge book value drivers, really, really successful in terms of the way they're positioned, they're going to do well. Of course, we can't predict them exactly. But then these more predictable fee-based businesses that have real fundamental growth built in based on the way we're positioned, and I think over time, we'll continue to grow. And I think we're going to wake up one day down the road, and the mix is going to look different. And the returns are going to -- people are going to -- it's got to click, and people are going to say, "You know what? This really does make a difference." And we'll just keep driving towards it that day.

Okay. I will look forward to that day.

I will look forward to that day.

Our time is now up. I thank you for joining me. I hope we're sitting here just like this one year from now.

I plan to be here one year from now. You think you will be here one year from now?

Okay, I'll be here.

Okay, then we'll be here together.

See you.

I look forward to that day.

Okay.