Mike Mayo: Hi. The pivot’s not new. It’s been advertised. I guess what’s new is the actual losses. So looking back, who is accountable and who pays the price for the losses with GreenSky, the Marcus loans and a consumer expansion strategy that was wider than you want it to be now? And then looking ahead, once you eliminate what you want to eliminate both on the consumer side and principal investments, how much would that alone improve ROE? Thanks.
David Solomon: Thanks, Mike. Appreciate the question. The leadership of the firm, which includes myself and the other senior leadership, are responsible for everything that happens here and everything that we do for our shareholders and for our people. So obviously, we’re responsible and accountable for any decision that we make. I said publicly before that I’m happy that we pivoted. As you say, the pivot is not new. We’ve made the pivot. We said we were going to do certain things. With hindsight, you will do certain things differently. We obviously reflect. We learn from the things that we do. But I think it’s important for companies to try things, for companies to learn and adapt. When you make a decision that you think is a wrong decision for shareholders and the firm, you adjust accordingly. So we’re doing that and we’re moving forward. The second part of the question was?
Mike Mayo: How much does ROE improve simply by discarding of your extra principal investments and the remaining consumer businesses you want to get rid of?
David Solomon: Well, I think we’ve given you a bunch of transparency, Mike, just looking at this. But if you look at what created a drag to ROE this quarter, 75% of the drag to ROE this quarter were the impairments and the rough [indiscernible] on the historical principal investments. And if you look over the last few quarters, the most significant impact on ROE performance has been the historical principal investments. Now also, there were benefits from those historical principal investments historically. But in this environment, obviously, you don’t see that. We think it’s a better business to release that capital and run a fund business, a lower capital fund business, and so we’re driving that. I think earlier in the call, we talked about the through-the-cycle performance of the banking and markets business.
You can see the banking and markets ROE right now and also the forward ROE of the Asset & Wealth Management business with less capital in it. The drag from the platforms is getting smaller. And over the next 12 to 24 months, it will get smaller, too, hopefully eradicated. And so that will give you a cleaner ROE that we continue to believe can be mid-teens through the cycle.
Mike Mayo: And then what is your ability and appetite for more buybacks? Basel III, of course. But to the extent that you’re discarding of the principal investments, that theoretically should free up more capital for either buybacks or reinvestment elsewhere. Kind of what are your plans and what are your limitations?
David Solomon: Yes. So I think Denis highlighted this in the prepared remarks. We’ve built a pretty big cushion and buffer, given that we successfully reduced our SCD based on actions we’re taking. We think that under the stress test, as we continue to reduce principal investments, we will have more benefit to SCD. Now obviously, Basel is out there and it’s uncertain, so we’re, at the moment, operating a little bit more conservatively around that, and we’ve highlighted that we probably will be a little bit more conservative on buybacks until we have more clarity. But we will continue to buy back stock. We will continue to pay our dividend. And as we have clarity under this strategy, there should be meaningfully more capital release, which could ultimately benefit to further buyback. But at the moment, we’d like — we’re going to be a little bit more cautious and have a little bit more clarity around the capital rules before we flow ahead.
Mike Mayo: All right thank you.
Operator: We’ll move to our next question from Ryan Kenny with Morgan Stanley. The floor is yours.
Ryan Kenny: Hi. Good morning. Thanks for taking my question. So wanted to follow up on the earlier questions on markets, maybe asked another way. So trading revenues are clearly extremely strong. Industry wallet and both fixed income and equities is tracking well above pre-pandemic levels, and you’ve been taking share. But looking forward, is there any scenario related to Basel Endgame where we see industry wallet size shrink? And as you think about higher for longer rates, how do you expect that, that impacts the various trading businesses?
David Solomon: Look, I think the intermediation activity for large institutions and corporations and governments around the world continues. The growth of the government in the world continues. The market capital world continues to grow and expand. I can’t and I won’t speculate on exactly where the final Basel rules wind up and how everyone optimizes through all that, but I don’t think anything is changing in intermediation. And the need to finance the positions and the activities of so many of our clients is growing. And so I continue to think for leading players that have scale and global footprint and are in a leading position in these markets businesses, I think they’re very well positioned in these market businesses. Of course, there will be ups and downs in those businesses. But I think the businesses will continue to perform very, very well.
Ryan Kenny: Thank you.
Operator: Our next question comes from Devin Ryan with JMP Securities. Please go ahead.
Devin Ryan: Thank you. Good morning, David and Denis. Want to come back to Wealth Management. I know that the sale of Personal Financial Management is a small business. But just if you can remind us how and where you want to compete in Wealth Management moving forward. And David, maybe give a little more color on some of those growth opportunities you alluded to that you’re seeing there across the globe. Thank you.
David Solomon: Yes. So I appreciate that question, Devin. Our focus is on ultra-high net worth management where we have a leading franchise. I just highlight that ultra-high net worth management — high net worth wealth management is still a very fragmented business. And while we have a leading franchise, leading franchise is kind of mid-single-digit share and we have less share than that in places like Europe around the world. We’ve seen really good growth in Europe. We see continued growth in the US. We have an ability as we put more resources on the ground and invest in more resources to cover clients to continue to grow that business. We’ve seen good growth over the last five years. I think we have neat run rate room to do that.
One of the decisions we made, and again, this is on focus and kind of a lesson learned is by selling United Capital and selling PFM, which was a small business, as you highlight, it allows us to take the resources and the investment we might have geared towards growing that and add it to our investment in ultra-high net worth growth. And we think that’s a better returning business and something we’re very confident that we can continue to execute on.
Devin Ryan: Okay, terrific. And then just a quick follow-up. So the $15 billion capital call facilities with Signature Bank, it sounds like you think that could help gain share with alternative asset managers. And you framed out obviously why that’s such an important customer base for Goldman Sachs. So if you can, maybe give us a little flavor for how that’s going to help drive market share and how you think about where you sit with sponsorships, given how important they are as a customer for Wall Street, whether you have any sense of like where you are in the top three or where you can go from three to number one? Or just any flavor for where your market share opportunities exist there?
