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

Wrapping up day one, which is, by all accounts, a very successful day for our 22nd Annual Global Financial Services Conference. Very pleased to have David Solomon, Chairman and CEO of Goldman Sachs. David, thank you for being here.

Thank you. This marks kind of back-to-school in [indiscernible] every year. So back to school.

Here we go. We can just put up the first ARS questions, which we ask all the companies. But David, I'll go to you. A lot's changed since we last spoke at this conference a year ago, your strategy is probably better understood and appreciated by the market, clearly. Maybe just share your perspective on your strategy, what you've accomplished and maybe key opportunities across both Global Banking and Markets as well as Asset and Wealth Management. .

Sure. And it's an interesting perspective because you look back a year, et cetera, there's no question we've made good progress. I feel very good about the way the firm is positioned and the way we've kind of clearly articulated our focus on the firm. We continue to make progress in global banking and markets. I think the franchise is in very, very good shape. I think One GS has been an extraordinarily strong client center operating resource, but that has allowed us to consistently gain share in our core businesses of investment banking and also sales and trading. That business is a business that's going to grow with GDP growth and market cap growth in the world. We have a leading position. We're a leading player in that business broadly. And I feel very good about the talent, the execution, where we are the way we're positioned. Second, I think we've made a lot of progress, particularly in the last 12 months around our asset wealth management platform. And as I think you know, and you and I have talked about over the last five, six years, the movement over a number of years to get all these businesses together, get the right management in place, get the right focus and move it all forward. It has been a journey, but I think particularly in the last 12 months, we've made very good progress, and I think this business is very well positioned where it can grow high single digits, and we can continue to improve the margin structure and returns of that business. We've been on a journey to reduce the balance sheet density of the business and have made very, very good progress with that and ahead of schedule. Our fundraising continues to be quite strong. We can dig into all this if you have more specific questions as we go. But it's a business where we're the fifth or sixth largest active asset manager. We have a right to win. We've got a broad scale platform that's growing very nicely. The opportunities in private wealth, especially given how we're positioned there. I think we're strong and we're executing, but there's more upside and more to do over the next three, four years, and we're very, very focused on that, that execution. Away from that, we've continued to narrow our consumer focus, and we're making good progress on that, and that's now a very, very small part of the firm. But I think the biggest thing over the last year, to your point about the story being better understood, I think it's very clear that we're focused on two primary businesses. We're well positioned in those businesses. I think investors understand the opportunity for us in those businesses to continue to grow them and also over time to improve returns.

We're going to unpack a lot of that. But before we do, just given the market backdrop and ongoing execution of your strategic priorities, maybe what's your latest view on the operating environment and any updates on performance trends this quarter?

Yes. The operating environment has been good, in particular our client franchise, as I mentioned, has been very, very strong. I think with respect to the quarter, I would highlight a few things. First, with respect to trading, I would say that with FICC and Equities, we had an extremely strong third quarter in 2023. And given this quarter, given what I'd say is a more challenging macro environment, particularly in the month of August. That business is trending down close to 10%, largely due to FICC. Second, I think, as you know, and I mentioned, we continue to reduce the private equity and alternatives on balance sheet investment, and we've made very, very good progress. Obviously, as we do that, the revenues from those activities are going to come down and move towards the medium-term targets we set out for that. This quarter, there are a handful of positions that are leading to those line items being significantly more muted. And so I'd highlight that. And then last, on our consumer business, I talked about the narrowing of the focus. We've made significant progress on the transition of the GM card platform and also the sale of our seller financing loans. The combination of those two things this quarter will likely have an approximately $400 million pretax impact largely showing up in revenues. And so those are a few things I'd highlight. Investment banking activity continues to be better, and we're looking at good signs in backlog, et cetera, although I'd say that I've been surprised that the financial sponsor activity has not turned on as quickly as I would have expected, but I expect as we go through the rest of the fall and into 2025, we're going to see that financial sponsor activity pick up a little bit more.

I guess before we move on, maybe just a few follow-ups to some of the [indiscernible] you just said. So total trading revenues down 10% year-on-year in the third quarter.

Trending down 10% at this point.

And led by FICC. I guess what, in particular, within FICC, was challenging.

It's nothing in particular. We had a very, very strong third quarter of 2023. I've seen a couple of other people guide. I think relative to 2023, it's just the activity levels. But I think this is partially because of the disruption that occurred in August. This is -- it's not at the same pace as the first quarter last year, but there's still a few weeks left, so this can continue to evolve.

And then on the AWM kind of moving more quickly towards a normalized number? Is that specific actions that you're taking?

The action that we're taking is we keep reducing the balance sheet. And so one of the things, we keep producing this legacy held for sale, private equity and debt investments. I think as that balance sheet gets smaller, the volatility around smaller numbers is going to be more significant because it's just not as broad and diverse portfolio. We used to talk about how broad and diverse the portfolio it is. It's a smaller portfolio. And so if you have a handful of things, it can make it materially more muted versus the way U.S. analyst model it.

And then the $400 million on the GM and finance business, that's a $400 million negative.

It's a $400 million negative. Pretax that is mostly reflected in revenue as we transition the card program and also sell these [ seller ] financing ones.

And so we're close to maybe [indiscernible] talking about --

We're making progress. We're not done, but we're making progress. But as you know, it's a process. But each of these things become something in the rearview mirror and less that we look forward that we have to continue to work with.

That's helpful. Maybe let's just zoom out and unpack maybe some of the longer-term opportunities across the business segments, maybe start with AWM and just give us your latest thoughts on the key growth levers in that business.

Yes. There are three things at a high level on AWM. There are three things that we're really focused on. We're just given the make of our business and the way we're positioned they're driving a lot of our focus. First is private wealth. We supervise at this point, $1.5 trillion of private wealth assets for the wealthy assets of the individuals in the world. This business is growing very, very nicely. It is still a very fragmented business all over the world. The constraint for us has been adding more advisers to continue to scale, and we are making investments in adding advisers. I think we have a high degree of confidence in our ability to continue to add scale to our footprint and particularly when you get outside of the United States where our market shares were smaller. And so we continue to make very, very good progress investing in the wealth business, expanding wealth business and in addition, our focus on being a private banking lender there is something that we just have really not focused on for a long, long time, and we've meaningfully increased our focus and its interest. And when you lend to people, it's a virtuous ecosystem, it improves the overall quality of the private wealth relationships. So one, wealth, two alternatives. We've talked about it. The fundraising continues to be quite strong. I think at the end of last quarter, we highlighted that we thought for the year, we'd be in the 50s, and we're certainly on track for what we've -- for the public statements we've made around our fundraising. And in the context of that, we continue to grow and scale those businesses, but I still think there's a lot of upside and just the secular trend around private capital allocation, I just think we're very well positioned for that given the scale of our platform. And so that continues to move. And then the last thing I'd highlight is broad solutions, the big capital allocators in the world want customized solutions as they look to deploy capital. And given the breadth of our platform, the global nature of our platform, I think we're very, very well positioned to meet those big capital allocators needs. And there are very few people that can look around the world and say, okay, I want exposure to Asian credit or I want a particular kind of exposure to or credit around the world, but no U.S. credit. We have an ability to package for what people want, given the breadth of the strength of our platform. And so we get very, very good reception. The OCIO business, where we outsource the management of big pension funds and insurance platforms is another business. It's growing nicely, which is very solution-oriented. So I think we feel pretty good about those three opportunities, and that's driving the overall progress of the broad asset and wealth platform.

I guess wealth management solutions, alternatives, private credit all sound like big opportunities. Maybe if you could just unpack that a little bit, maybe first on wealth and just where do you see the biggest opportunities within that? What are your competitive edge? You mentioned lending, what's compelling about that?

Well, it's not -- when you say what's our competitive edge, our competitive edge is that we have an incredible brand and an incredible offering for very, very wealthy individuals. In the United States, I think we are a clear leader in this service for very, very wealthy individuals. Our average account size and private wealth is $60 million. We are dealing with people that have large investable assets and our market share with that cohort of people is very, very strong. As we add to the services that we can offer, and we have a broad package and that's something we've been working on, that strengthens those relationships. So we were not a place where those people typically went for private banking and lending, but we are now becoming much more active on that and that strengthens the relationship. Ayco is a platform that's been growing very, very nicely for more than a decade, and it continues to grow nicely. And that's another very, very unique service that packaged in with the advisory wealth platform strengthens our overall offering. So our advantage in this is that we have a very, very good offering. It's still a very fractured business. We have a very, very good brand. We have incredible access given who we are and the way we traffic in the world with wealthy individuals, and that positions us very, very well to continue to grow that business.

And then maybe you talked about solutions. Maybe just talk about what your differentiator in your product set and how is that tying to the broader capabilities?

So when you talk about solutions, this is really about customization and being flexible. And that's really what the capital allocators want. And so when you have a very broad platform where you're truly global and you really have the full range of product offerings, your ability to customize for people is just better. So if you look at large-scale active asset managers, liquidity, public fixed income, public equities, alternatives, scaled globally. There really aren't a lot of people that have that kind of an offering. And so your ability to customize for the biggest capital allocators with the broadest, most global offering is something that I think differentiates the firm.

Got it. And then on alternatives, definitely a scaled player, top five, significant growth opportunity. Maybe just unpack what your priorities are in that business. What are your competitive advantages?

Yes. So we are a scaled player because we are top five or six alternatives player. But interestingly, we're not as scaled as we'd like to be in certain places. Private credit, we're scaled at $140 billion of private credit assets, but when you think about Goldman Sachs and way Goldman Sachs is positioned in the world, you could argue that had we been focused on this the same way 15 years ago, given the way private credit is going, we'd be scaled a little bit more. There's still lots of, I think, secular room to scale in private credit. I think we're well positioned. I think one of the things that differentiates us is our ecosystem from an origination perspective. The fact that we are -- when you look at the leveraged finance business, a primary originator and distributor gives us a very, very unique position. And our One Goldman Sachs capability to bring those things together, I think it's something that's a little bit differentiated. We've been in the private equity business for a long time. I think we have a nice niche with very strong historical performance there. I think infrastructure is a place where we've been under-scaled and I think there might be opportunities for us to scale further over time. Real estate is a place where we're under-scaled and opportunities for us to continue to scale. I think what we call XIG and the secondaries business, we're scaled and we're a leader. That's an example of the state and alternatives where we really are scaled. So we have a mix of both overall scale, but like with anything else, there are places where we have opportunities for growth to scale more and we're particularly focused on those.

I guess you mentioned private credit a couple of times. Obviously, a big area of focus in the alternative space given both the growth opportunities, but also risks. What do you see from your vantage point?

I see lots -- with a secular view, I see lots of opportunity. I'd also be the first to say that at some point here, there will be a credit cycle. We've gone a long time without a credit cycle. There will be a credit cycle. And in that credit cycle, the returns and the performance in the credit business will be different than what we've seen. We think we're good risk managers and good underwriters, but we think cautiously, both when we invest to grow about risk management, and how you can run through cycles. And I'd just say at the moment, I assume we'll come to a macro question, and we'll get back to this, but the U.S. economy, I think, is in reasonable shape. And so I don't see -- it doesn't seem obvious to me that we're immediately heading into a credit cycle here. But at some point, there will be a credit cycle. And I think to be a successful credit investor, you have to both deploy capital and then also manage that capital when you go through a cycle, and that's something Goldman Sachs has been in these businesses for decades. And I think we've got a lot of experience and breadth to manage that appropriately.

And then maybe talk about the investment banking outlook and just give us your thoughts in terms of what you're seeing, the timing of pickup in activity, what you're hearing from your clients, particularly the sponsors?

Yes. So investment banking activity has been better. I think strategic activity has picked up meaningfully, although there's still some headwinds because of what's going on in the FTC. It will be interesting to see as we get through the election, whether or not there's any resorting of that, regardless of which side wins in November. But there's no question companies have kind of gotten out of the pandemic. They've gotten to a place where when they think about the economy broadly, they think the chance of a relatively soft landing is better and so they've been more forward strategically focused. And we see that if you look back to the comments that we made in our earnings in July, we talked about backlog acceleration. And I think we use the word significantly, if I'm remembering correctly. And so we've seen good engagement and good activity on that front. Capital markets, equity capital markets activity is up, but the IPO market has still been slower than we would have hoped at this point in time. That activity has actually been relatively robust. The package of that is better, but my high level is we're still not quite at kind of 10-year average, it is still below 10-year averages. I think we're going to get to 10-year averages sometime later this year, next year. There's no reason why fundamentally we should be below. The big thing that's been slowing that down or constraining that, in my opinion, is that financial sponsors have been slower to transact and less active. And the velocity of that, I think, will increase. They've been taking the optionality on value expectations or market expectations that have been higher than where the market is, but I think there's a lot of pressure from LPs for distributions and moving forward. And at some point in time, velocity of capital becomes important. And I think we're starting to see signs of that's picking up.

I'm going to press my luck here, but you gave us kind of guidance on trading, AWM and consumer, you didn't talk about investment banking.

You're going to press your luck. I came in with three specific things, I said so, if there was four, you would have gotten four.

I guess as my follow-up then, what do you think it takes to get the sponsors more...

Just time. This is not -- remember, response is kind of 35% of the M&A market. It's just slower. And the reason why we had an environment where monetary policy was in a certain place. By the way, if we have some interest rate cuts here, that will help a little bit in pushing things forward. But the multiples have come down and people have to move their expectations to those multiples and that's happening. It just takes a little bit longer.

Got it. And maybe on FICC and equities. Can you talk to us about the catalyst to stimulate activity from here and maybe talk a bit more about the financing businesses.

I want to be clear. Activity is good. These clients need these services activity. Activity is reasonable. It's just -- one of the things we have to deal with in managing the firm is everybody always, in all these discussions, it's what's this quarter? What's this quarter? Okay? And we're kind of looking at the business and saying, okay, how are we growing these businesses and capturing market share over a period of time. You look at these businesses. And right now, we're talking about the third quarter last year, which was a very, very strong quarter for a variety of reasons versus the third quarter this year, which is fine. That's the way you look at it. Now by the way, a lot can happen in the next three weeks, one way or another that can affect that. But activity with our clients, clients are active. There's a lot going on in the world. They're externally focused. We're very well positioned and very engaged with them. And so my expectation is that will continue through the year and that will continue into next year. But these are big businesses and with the financing mix in these businesses with people like ourselves financing all these clients and the need for financing to finance all these positions, the stability, the overall stability of this, I think, is greater than it might have looked 5, 10 years ago.

Got it. I guess you recently were not that long ago took the investment banking piece and the trading piece and kind of made this combined global banking and markets unit. Maybe just talk to how you think about the long-term positioning growth, return profile of this kind of consolidated business?

So I mean, there are a number of reasons why we consolidate the business. One is everyone is showing their business that way. And I think there are a variety of advantages are showing our business that way, too. Second, there are enormous synergies. If you think about the way the clients have evolved, we have an enormous number of clients that are huge investment banking, clients, there are also a huge market clients and vice versa. And the ability from One GS perspective to really think holistically about our clients from the way we serve them, by the way, this also translates over to asset management and wealth management, too. This was helpful. And so we're finding synergies in the way we cover clients, the way we serve clients and the way we can differentiate our positioning with them. As I said, when we started, this is a business that is going to grow kind of a GDP and market cap growth. I think the world will continue to grow. I think there will be GDP growth in the world. I think there will be market cap growth in the world. And these businesses participate in that. Then there are also market share opportunities around that. And while we have a leading business position in these businesses, there are places where there are little niches where we don't. And I think one of the things that we do very well is we try to hold ourselves very accountable to looking at where we're outperforming, where we're underperforming and then focus on the underperforming places and invest in pulling those [ wallet ] shares up. And so I think we have a very disciplined process around that. And so I think what you'll see is kind of GDP kind of growth in that business over time with some wallet share gains where we can [ eat ] them out, but the competitive businesses and as a leader, you can't take wallet share -- market share forever. And so we've made good progress on that over the last over the last five years, I think it's about 350 basis points of real wallet share improvement, which I think is pretty sticky wallet share improvement. So when I look at that business, when I think about that business, the returns have looked very good over the last four years. I think our returns have averaged between 15% and 16% over the last four years. I don't necessarily think that in every year, they're going to stay at that level. But I do think this is a business that we think we can run mid-teens through the cycle will be parts of the cycle where those returns will look better. There will be parts of the cycle or they'll look a little lower, but I'd say fundamentally, the overall return of this global banking and markets franchise has been uplifted based on the work we've done over the course of the last five years.

Makes sense. I mean you talked to CEOs on a regular basis across all industries and AI seems to be coming up in kind of everywhere we look. Maybe what's the latest NAA in both Goldman's operations but also with clients and how do you expect that to translate into efficiencies and productivity improvement? .

Sure. So it's -- I mean it's interesting. Everywhere I go and everywhere I go to talk to CEOs, people want to talk about AI. There are two things that I'd highlight here. First is broadly market impact and our Goldman Sachs can benefit from that? And secondly, what's going on at Goldman Sachs. How are we thinking about this in terms of our own business and our own platforms. Any time there's a significant transition in the world that repositions the way companies operate, the way companies do things that changes the way companies are positioned because of what we do as an investment banker and a trader, we see tailwinds to benefit from that. If you think about the infrastructure and the investment that's being built around this, there's an enormous amount of capital raising going on a global basis. There's going to be an enormous amount of consolidation and thought process that goes into how people position for this. Some of it's going to be correct. Some of it is going to be incorrect, but the key thing for us is there's going to be a lot of activity. And so our advisory teams are deep, deeply engaged with governments, with the hyperscalers, with companies, with everyone as they try to figure out how does this affect them, how do we participate? What are the opportunities for us, whether it's opportunities where people are participating by being part of the value chain or the ecosystem or whether it's just thinking strategically about how it changes their business, how it changes the competitive nature of the business, how they have edges, they can be freed or they have edges where they can accelerate their advantage. And so that's just very good for investment banking in our markets business, broadly. With respect to the firm, we think about this first and foremost as productivity gain for super smart people. While the firm is big, and we've got lots of platform and processes in what we do, but a significant part of what makes Goldman Sachs, Goldman Sachs is we've got lots of very, very talented people. Very, very talented people that are focused on our clients. And if you can give them tools that make them more productive and allow them to spend more time with clients to allow them to get information more quickly to clients or allow them to help clients solve their problems faster all that accelerates productivity. And so that's the first lens that we kind of think about inside. We have a handful of what I'd call large focus areas that we're very focused on that allow us to do that. If you think about investment banking and the way information is gathered and presented to clients, that's a great example of that. But also if you think about coding and our ability, we have 11,000 engineers as you think about our platform broadly, our ability to increase coding productivity by a meaningful percentage is hugely valuable to the firm. And it doesn't necessarily mean you take out cost, it might mean you can do things for the same amount that you've wanted to do, but you've had to defray in terms of some of the investments you make. So first and foremost, it's productivity. Secondarily, we're doing a bunch of work and have spent a ton of time thinking about where we have processes that we can automate that do lead to efficiencies. And so we're doing a lot of work on that. And my expectation is, over time, you'll hear us talk with more transparency as to how we think those efficiencies can come through. And where we have confidence that we can actually automate or change processes and where we don't. And I'd say, one of the things I just say it's a big question. I know there's a lot of talk about efficiency and automation, but it's hard in big businesses to fundamentally change processes and the way you do things. My own view is that, that takes some time as people focus on it, but we're very focused on trying to figure out ways that we can make that happen.

And then maybe we could put up the next ARS question. And David, while the audience looks at this, maybe I can ask you a lot going on with Basel III at the moment, I guess, we'll get Vice Chairman bar tomorrow and supposedly 450 pages next week. We're revising all the stuff we looked at over the last year. But I don't know, I'd love to hear kind of your thoughts, you did get some relief on [ SAB ] versus, I think, what was initially feared. Potential changes to G-SIB. And just maybe how you're thinking about capital management or the return file given all that's going on.

Well, I have to start and you just highlighted a handful of things. I'd say there's uncertainty right now. And the uncertainty doesn't mean that it has to be a negative outcome, but there's just a lot of moving pieces, okay? So you've got Basel III where a lot of moving pieces. And I think we're still a ways away from the resolution even though you're going to hear something from Vice Chair bar tomorrow, I think we're waiting away still from a resolution around this. Secondarily, you've got CCAR. And you certainly -- the there's been discussion in the press about dialogue between the banks and the regulators around CCAR. And I'd just say we appreciated the fact that in our reconsideration, we got some relief from what was originally put forward. But I'd still say we are very, very engaged with our regulators around creating more transparency on this process and less volatility around the SCD. And I know that many other large institutions are also engaged in that. So there's uncertainty in question on that. And then on G-SIB, there's also potentially proposal changes. And all these things into relate -- so when you look at Basel III and if you think about the fundamental review of the trading book versus CCAR and the SCD and the G-SIB this all interrelates. So you can't -- it's very hard -- that's why I say uncertain, we're running a particularly large buffer now, a larger buffer than we would normally run. So I think we're very well positioned for the next 6, 12, 18 months as we operate. But I think it's going to take some time to get more clarity. But my guess is that it's going to take some time. But we're very engaged as an industry and we're going to engage this firm.

The audience seems to think the Basel III capital impact will be half of what you proposed or you thought on the original proposal.

Well, it's interesting. I mean I see here a variety of outcomes. I'm not going to -- I'm not going to make a public statement or I think it falls in that range. But I would just say the discussions are very, very fluid. I would just highlight for everybody. And I think this is important to remember -- the purpose of Basel III when it was put forward was to not increase capital in U.S. banking institutions. It was to bring European institutions up to the -- not just European other institutions around the world up to the U.S. standard. That is why it was put in place. I think this is a process. It's going to take some time. Bar will comment. There'll be some sort of a reproposal. There will be lots of commenting on that. So this is still going to be a journey that's going to take some time, in my opinion, to really understand where it's going to come out. And there are a lot of working parts across G-SIB, CCAR and Basel III.

We had [indiscernible] this morning to speak a House Democrat and kind of made the same point that this was not intended to increase bank capital. So I thought that was interesting. Given these uncertainties, I guess, any changes in terms of your thinking on capital management or your return profile?

No. We continue, and you've seen it in the context of the way we've managed things this year. First and foremost, as we generate capital, if there are opportunities to put in the business and get accretive returns to serve clients, that's going to be our first focus. Second, we're going to continue to grow our dividend. We're very committed to that. I think we've made very good progress on the growth of our dividend over the last 5 years. And then third, we'll return capital in the form of share buybacks.

Maybe we have the next ARS question for the audience. let's kind of maybe bring together a lot of the stuff we've talked about before and talk about the firm's term targets, how would execution continue to unlock shareholder value in the light of the recent valuations?

I'm sorry, in light of recent

Evaluations.

I'm focused on running the firm as well as we can run the firm on continuing to strengthen and grow the returns of the firm and continuing to grow the firm. If we do that, the market will then put a evaluation on the firm and that evaluation, my guess is going to move up and down over time. But if the firm is bigger and the firm earns more, over time, the firm will be worth more. So our focus is on the medium and the long term, how do we grow the firm and improve the returns. It's hard. I still feel very comfortable that we are making progress on our medium-term goal of reaching these return targets, and we're going to continue to work away at it. And there's uncertainty, obviously, as we just discussed around capital. But I think it's also unclear where all these things land. And by the way, there should -- there could be some gives, okay, where capital is added, but there could be some gets where there are changes that actually takes some capital away. So it's all interrelated. You've got to see we don't know. But we feel good about our ability to continue to move toward our return targets, and we're going to continue to work very hard to do it over the medium term.

Makes sense. We get the answer to this. So the market -- While you does expect you to achieve your targets, although a decent amount expects it to be challenging, given the cyclical nature of revenue streams, maybe an opportunity to talk about how you -- I would say, increase the percentage of revenues that are maybe kind of durable. Maybe just focus on that.

That's a good thing. It's something I know that you know and many of them know we've been very, very focused on. There are a handful of things over the last 5 years that have really changed. We have $10 billion run rate of management fees. And by the way, that's still growing. And obviously, management fees, the one thing I like about management fees is I used to remember 10 years ago, I go home on Saturday, okay? And I'd be wondering where we were going to get $1 of revenue on Monday. Now with businesses like management fees, I know we have some revenue on Saturdays and Sundays too. So that is a more durable form of revenue. Joking aside, we've doubled the management fees of the firm and the management fees are still growing. Number two, we are doing more financing business in terms of financing our clients. That was not a place that the firm was focused and those financing revenues are more durable revenues. We have other fee-based business that is durable. And so we've made good progress on this. And I think one of the things we've tried to do and we put a slide forward back in January or February when we did our update is to show that when you look at some of the businesses that even do have some volatility, if you look over long periods of time, there's a base there that's consistent in almost any environment and trying to think about that as also more durable. I don't think M&A revenues, if you look at them quarter-to-quarter, they move up down and around, if you look at them year-to-year, they move less, but they're not going to 0. We're not going to wake up one year and have 0 M&A revenues. We're a leading M&A provider, M&A is a part of things, there can be variability in that, but over time, we're going to capture our share of that in a regular way. So we've got work to do on this. We're very focused on this. But the more that we can show that the volatility of the overall mix is coming down. And a lot of this will come over time over time from the growth of the Asset & Wealth Management business because the growth of the Asset & Wealth management business will outpace the growth of the global banking and markets business. And as it does that, the mix will evolve.

Talk in that context just how you kind of think about the expense base in kind of a cyclical ever changing revenue backdrop?

Well, we've tried to be very, very disciplined on expenses. And when you look at the non-comp expense base and you kind of take out some things that run through expenses in more onetime, I think we've done a pretty good job, but we're zealously focused on expenses. There are pressures. One, it's been an inflationary environment, and there are a variety of things that are just more expensive. It's not just the things that get talked about in inflation. There are all sorts of things that just are more. So we've had inflationary pressures like every other business. And so we've tried to manage around that by creating efficiencies. I think the competition for talent continues to be very, very robust. I think broadly speaking, the cost of the highest, most productive talent continues to go up, and so we have to manage around that. So that's a headwind at times on the expense side. But overall, we continue to be very, very focused on controlling our expenses, investing in efficiency and automation in places that we can and there's work to do there, but I think we're making good progress on that front. And we're always going to be as disciplined as we can be. And if we find for some reason, it's not in the right place, we'll take the hard decisions that are necessary to get it to the right place.

And then my final question. Earlier, in one of your answers, you used to the fact that maybe we'll ask me later about the U.S. outlook and kind of what I'm seeing. So obviously, a lot of things going on, changing rate environment, upcoming election, political noise. Maybe talk to kind of what are you hearing thinking looking out?

And fundamentally here in the United States, I think the U.S. economy is still in pretty good shape. And I think broadly speaking, the base case of a soft landing is the most likely scenario. Our economists at the moment, have the chance of a recession kind of 20% and the baseline in any environment is 15%, so just slightly higher. I do think there's no question, I start to make real progress on inflation. If you look at kind of where the base rate is now and a 2.5% inflation rate, I think the Fed is definitely comfortable with a lower base rate based on where inflation is now than where we are. That's why we're probably going to see some cuts as we head into the fall. The question is to move further meaningfully further, you kind of have to get from 2.5% to 2%. I'd say, broadly speaking, when you look at the economy, there's been a little bit of a slowing with the consumer on some fronts, but still the economy remains pretty durable. We had a consumer retail conference at Goldman Sachs last week. I was there for a little bit. I spoke to a number of clients. And there are places where there's softness, but overall, the messages were quite constructive. So we'll watch it carefully. Obviously, with election, there can be change and policy differences, which can have an impact. But broadly speaking, at the moment, the environment continues to be from just a pure economic perspective in the United States, I think, reasonably stable.

Great. With that, please join me in thanking David for his time today.

Thank you. Appreciate it. Thank you.