The Goldman Sachs Group Q1 2023 Earnings Call Transcript

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Provided by Quartr
April 18, 2023

Key Takeaways

  • Solid Q1 performance with net revenues of $12.2 B, EPS of $8.79, and ROE of 11.6% despite significant market volatility.
  • Proactive response to banking turmoil—Goldman joined a consortium to place a $30 B uninsured deposit at First Republic and highlighted its risk management culture, underlining its role as a source of strength in the financial system.
  • Global Banking & Markets delivered $8.4 B in revenues and an industry-leading 16.6% ROE, outperforming peers even as advisory and underwriting activity remained muted.
  • Asset & Wealth Management revenues grew 24% to $3.2 B with record management fees, but legacy on-balance-sheet investments remain exposed to volatility, prompting plans to reduce principal positions—including sales of Marcus loans and exploring GreenSky divestiture.
  • Robust capital base with a 14.8% CET1 ratio; returned $3.4 B to shareholders in Q1 via $2.5 B of buybacks and $870 M in dividends, while signaling moderated repurchases in Q2 amid ongoing market uncertainty.
AI Generated. May Contain Errors.
Earnings Conference Call
The Goldman Sachs Group Q1 2023
00:00 / 00:00

There are 16 speakers on the call.

Operator

Good morning. My name is Katie, and I will be your conference facilitator today. I would like to welcome everyone to the Goldman Sachs First Quarter 2023 Earnings Conference Call. This call is being recorded today, April 18, 2023. Thank you.

Operator

Ms. Haliou, you may begin your conference.

Speaker 1

Good morning. This is Carrie Haliou, Head of Investor Relations and Chief Strategy Officer at Goldman Sachs. Welcome to our Q1 earnings conference call. Today, we will reference our earnings presentation, which can be found on the Investor Relations page of our website at www.gs.com. No information on forward looking statements and non GAAP measures appear on the earnings release and presentation.

Speaker 1

This audio cast It's copyrighted material of The Goldman Sachs Group Inc. And may not be duplicated, reproduced or rebroadcast without our consent. I'm joined today by our Chairman and Chief Executive Officer, David Solomon and our Chief Financial Officer, Dennis Coleman. Let me pass the call to David.

Speaker 2

Thanks, Carrie, and good morning, everyone. Thank you for joining us. In the Q1, we delivered solid performance in a challenging environment. We produced net revenues of $12,200,000,000 and generated earnings per share of $8.79 and an ROE of 11.6 percent and an RoTE of 12.6%. The Q1 was certainly volatile, particularly for the banking sector after a fairly benign operating environment at Start of the year.

Speaker 2

In March, we witnessed the collapse of 2 regional banks in the United States. Stress quickly spread to a number of institutions across the financial sector, where we saw ratings downgrades and steep valuation declines in very short order. These stresses were not limited to the U. S. As we saw when regulators help arrange the combination of Switzerland's 2 largest financial institutions.

Speaker 2

It's important to appreciate the size of the disruption. Some of the market moves during the period were staggering, particularly in interest rates. To give you a sense of the magnitude, there have been just 4 days in the past 25 years that have seen 2 year yields move by 50 basis points or more intraday. 1 was in September 2008 and 3 of them occurred in mid March this year. Monday, March 13 was the biggest one day move in the U.

Speaker 2

S. Treasury 2 year yield in over 35 years. As we sit here today, it appears that the worst of the volatility is behind us. Prompt action by regulators was vital in bolstering confidence and stabilizing market sentiment. The events of the Q1 acted as another real life stress test and they demonstrated the resilience of the country's largest financial institutions.

Speaker 2

GSIB has been

Speaker 3

a source of strength for

Speaker 2

the financial system. We joined a consortium with 10 other large institutions and making a $30,000,000,000 uninsured term deposit and to First Republic Bank to send a strong vote of confidence and in commitment to the U. S. Banking sector. As for Goldman Sachs, our long standing and deeply rooted risk management culture helped us navigate this unusual environment.

Speaker 2

In our 154 year 154 year history, we have lived and managed through many periods of disruption. And it's our rigorous processes and planning for tailwind scenarios before the stress enable us to react quickly and effectively when they do occur. While it's impossible to predict the exact form of market stress will take and we won't always execute perfectly, our risk management culture, Strong liquidity and robust capital position have allowed us to navigate a complex environment while also continuing to actively support our clients. Given this backdrop, it was clear our clients needed help managing the risks and turn to us for our expertise and execution capabilities. Extremely muted and below recent averages as capital markets were further delayed from reopening in a meaningful way given the market disruption.

Speaker 2

All in Global Banking and Markets delivered industry leading returns of 16.6 percent in line with our through the cycle targets, Even while advisory and capital markets activity remain muted, this franchise continues to show impressive resilience in a variety of market environments Given our broad and diversified set of businesses, management fees across Asset and Wealth Management grew sequentially, But segment returns when the mid single digits is our on balance sheet investments remain susceptible to volatility in asset prices. It is a strategic priority to continue to reduce these positions and while we have made progress, there is still work to do. In Platform Solutions, we saw positive underlying trends this quarter with revenues greater than provisions and we remain focused on driving this business towards profitability. We also continue to explore strategic alternatives within our consumer platform businesses. In the Q1, we sold a portion of our Marcus loan portfolio and transferred the remainder to held for sale.

Speaker 2

While this activity is now reflected in our AWM segment, it is an example of our narrowing our focus in the consumer space. Dennis will take you through the financial impact of that momentarily. Additionally, we are now initiating a process to explore the sale of GreenSky. We believe GreenSky is a good business and is performing well with 1st quarter originations and our core home improvement loans up over 25% year over year and awaited FICO on total originations of over 780. Given our current strategic priorities, however, We may not be the best long term holder of this business.

Speaker 2

We will update you on our progress if and when there are material developments. As I close, I'd like to say a few words about the forward outlook. The recent events in the banking sector are lowering growth expectations Businesses and consumers continue to adjust to higher interest rates. While the forward trajectory is still unclear, we continue to be cautious about the economic outlook and we are operating the firm such that we are well prepared in the event that the environment weakens further. Overall, I feel very confident about the state of our client franchise and the long term opportunity set for Goldman Sachs.

Speaker 2

As the events of the past quarter have illustrated, we are operating from a position of strength And we have the people in place around the world to continue serving the broad range of clients' needs with excellence. And while much has transpired since we held our Investor Day at the end of February, We remain focused on our strategy to strengthen our leading global banking and markets franchise and grow our asset wealth management business. We are committed to delivering for clients and shareholders. I will now turn it over to Dennis to cover our financial results for the quarter in more detail.

Speaker 3

Thank you, David. Good morning. Let's start with our results on Page 1 of the presentation. In the Q1, we generated net revenues of $12,200,000,000 And net earnings of $3,200,000,000 resulting in earnings per share of $8.79 Turning to performance by segment, starting on Page 3. Global Banking and Markets produced revenues of $8,400,000,000 in the Q1, which generated an industry leading ROE for the segment of 16.6%.

Speaker 3

Advisory revenues of $818,000,000 were down 27% amid lower industry completions. Underwriting revenues continue to be below recent averages and were lower year over year. Despite the difficult backdrop, we were number 1 in the lead tables for completed M and A and high yield debt underwriting. We also ranked 2nd for equity and equity related underwriting. Our backlog fell quarter on quarter primarily in advisory, but we remain cautiously optimistic on the outlook for the second half of the year and twenty twenty four, particularly for strategic M and A.

Speaker 3

We also expect investors We'll need more certainty before financing markets reopen broadly, but we have seen an increase in underwriting dialogues in the 1st 2 weeks of the second quarter. FICC net revenues were $3,900,000,000 in the quarter, down 17%, as one of our strongest sets of results in rates was more than offset by significantly lower currencies and commodities revenues, which were very strong in the Q1 of 2022. In fixed financing, revenues rose slightly year over year. Equities net revenues were $3,000,000,000 in the quarter, down 7% year on year. A decline in intermediation revenues was partially offset by record financing revenues of $1,300,000,000 with the sequential increase driven by higher activity and increased balances coupled with improved customer spreads.

Speaker 3

Moving to Asset and Wealth Management on Page 5. Revenues of $3,200,000,000 rose 24% year over year, given improved results in equity debt investments And as management and other fees increased 12% year over year to a record $2,300,000,000 The underlying trends in the business remain strong. Private Banking and Lending Revenues of $354,000,000 fell year over year, driven by the partial sale of our Marcus unsecured loan portfolio as well as a transfer of the remaining portfolio to held for sale in line with our strategic decision to narrow our consumer ambitions. The associated revenue reduction of $470,000,000 was largely offset by a reserve release of $440,000,000 Additionally, we benefited from NII and incremental reserve releases associated with pay downs. All in, the Marcus loan portfolio was profitable for the quarter.

Speaker 3

Net revenues for equity investments were $119,000,000 driven by $229,000,000 in revenues related to CIEs and $85,000,000 of gains related to our $2,000,000,000 public portfolio, partially offset by $195,000,000 of net losses on our $12,000,000,000 private equity portfolio, primarily within real estate. This quarter, we experienced approximately $355,000,000 of impairments on our CIE portfolio, which are reflected in operating expenses. Net investments revenues were $408,000,000 driven by net interest income of $363,000,000 Moving on to Page 6. Total firm wide assets Supervision ended the quarter at a record $2,700,000,000,000 driven by $68,000,000,000 of market appreciation as well as $8,000,000,000 of long term net inflows, representing our 21st consecutive quarter of long term fee based inflows. We also saw meaningful strength in liquidity products with $49,000,000,000 of net inflows from new and existing clients amid the industry wide flows into money market funds.

Speaker 3

Turning to Page 7 on alternatives. Alternative assets under supervision totaled $268,000,000,000 at the end of the first quarter, driving $494,000,000 in management and other fees for the quarter. Gross third party fundraising was $14,000,000,000 relatively solid given the current environment and bringing total third party fundraising since our 2020 Investor Day to $193,000,000,000 While we expect the pace of fundraising to slow for the rest of 2023, we continue to feel good about the path forward and remain confident in achieving our 2024 target of $225,000,000,000 On balance sheet alternative investments totaled $57,000,000,000 of which $27,000,000,000 was related to our historical principal investment portfolio. Despite the challenging environment, We reduced these on balance sheet historical investments by $2,300,000,000 in the quarter. We are committed to our strategy to reduce balance sheet density, including reducing historical principal investment portfolio to less than $15,000,000,000 by 2024 year end.

Speaker 3

I'll now turn to Platform Solutions on Page 8. Revenues of $564,000,000 more than doubled year over year, driven by growth in loan balances and consumer platforms. This week, we announced the launch of a savings account for Apple Card users. We are excited to deepen our partnership with Apple through this additional offering and to introduce another source of deposit funding for the firm. In Transaction Banking, deposit balances ended the quarter slightly higher versus year end, while revenues of $74,000,000 were modestly lower quarter over quarter amid higher deposit costs.

Speaker 3

As we spoke about at our Investor Day in February, we're focused on further scaling this business with new clients and deepening our relationships with existing clients as we aspire to become their primary service provider. In this regard, We continued to see positive momentum on the platform as our client count grew by approximately 20% in the Q1. On Page 9, firm wide net interest income of $1,800,000,000 in the 1st quarter was down 14% relative to the 4th quarter, driven by increased funding costs supporting trading activities within Global Banking and Markets. Our total loan portfolio at quarter end was 178,000,000,000 essentially unchanged versus the Q4. Provision for credit losses reflected a net benefit of $171,000,000 including the previously mentioned reserve release associated with the market's unsecured lending portfolio and model updates, which were only partially offset by roughly $245,000,000 in consumer net charge offs.

Speaker 3

Spending a moment on our commercial real estate lending portfolio. As of quarter end, we had $29,000,000,000 of funded CRE loans. This portfolio is diversified by property type and includes $10,000,000,000 of exposure in the form of conservatively structured warehouse with typical LTVs of approximately 50%. Turning to expenses on Page 10. Total quarterly operating expenses were $8,400,000,000 Our compensation ratio for the quarter net of provisions was 33%.

Speaker 3

Quarterly non compensation expenses were $4,300,000,000 essentially unchanged versus the 4th quarter, but up versus last year. Majority of the year over year increase was driven by the aforementioned CIE impairments as well as expenses related to NNIP. Our effective tax rate for the quarter was 19%. For the full year, we expect the tax rate between 21% 22%. Turning to capital on Slide 11.

Speaker 3

Our common equity Tier 1 ratio was 14.8 percent at the end of the Q1 under the standardized approach, a 100 basis points above our current requirement and at the top end of our management buffer. In the quarter, we returned $3,400,000,000 to shareholders, including common stock repurchases of over $2,500,000,000 and common stock dividends of roughly $870,000,000 While we expect to continue to focus on sustainably growing our dividend, We would note that repurchases in any given quarter will vary. Though we find our stock price attractive at current levels, in light of the current environment, We expect to moderate our repurchase levels in the Q2 relative to the Q1. In conclusion, our Q1 results were solid in the context of a volatile environment. Our robust financial position allowed us to focus on serving our clients and helping them navigate this period of market disruption.

Speaker 3

Across our leading businesses in Global Banking and Markets In Asset and Wealth Management, we remain well positioned to continue to support our clients and execute on our strategic priorities. With that, we'll now open up the line for questions.

Operator

Thank you. Please limit yourself to one question and one follow-up question. We'll take our first question from Glenn Schorr with Evercore.

Speaker 4

Hi, there. Curious, you mentioned being optimistic about M and A in the back half, Particularly on the strategic side, I'm curious what and how you what you're seeing that gives you that confidence? Obviously, it must be conversations. And then what about the sponsor community? Thanks.

Speaker 2

Yes. Thanks, Glenn. So I appreciate the question and you're right. It has to do with dialogues and things that we can see. I'd say as we came into the New Year, there's no question dialogues have picked up.

Speaker 2

There's no question and I always talk about this When we talk about it broadly, confidence affects the ability for people to move forward and be active in the M and A market. And certainly, what's gone on over the course of the last 4 weeks Has slowed down some of the dialogues, but when you think about big strategic activity, I think most big companies continue to operate from a position where they're trying to make sure they have the scale and the strength competitively to advance their strategies. And So those strategic dialogues are quite active. And if you actually look over the course of the last week or 2, there have been a handful of deals that have been announced that highlight that. We're seeing more dialogues like that and so we're hopeful that more of that will come to fruition.

Speaker 2

I just think that's a steady part of the diet the companies need to continue to execute on to improve the strategic position. Now with respect to financial sponsors, we're still going through a reset. I'm encouraged by the fact in the quarter, We saw 1 or 2 deals where kind of the bid offer between the value that a financial sponsor could achieve and the financing price Came to meet, there was a good data point and a sell down of the legacy deal in the market. But I would say the financial sponsor activity is still muted And there's more upside as the reset on both value and financing costs continues. I think we're going to get there.

Speaker 2

I'd expect more in the second half of the year, unless it was a really strong, a much more pronounced economic disruption Because it just takes time for people to reset. We've now kind of gone through 5 quarters of reset. And so generally speaking, historically, you kind of see these things turn After 4 to 6 quarters. So I would just expect more of a base level of activity from what's been very, very muted.

Speaker 4

I appreciate that. And building on that, your comment about companies wanting to build on their strategic Maybe we could talk a little bit about your transaction banking platform because it's still growing. I'm just curious on the March events That we saw, did it cause any rethinking or maybe encouragement in terms of the direction of what you're doing with transaction banking and taking on those deposits. And did you notice any was there any noticeable behavior of how those deposits acted during the March crisis? Thanks.

Speaker 3

Yes. Glenn, it's Dennis. Thanks for the question. I'd say that our conviction around the transaction banking business remains very, very strong. I think what we were able to observe in the Q1, I highlighted in my script and is something that we are focused on Strategically, we grew the client count by about 20% in the quarter, which is a similar amount to all of last year.

Speaker 3

And we're very, very focused on continuing to improve our With our clients, offer them more and more services and grow this business steadily over the long term to create value. I think in terms of how the deposits themselves performed over the course of the quarter, they were in line with our expectations. And as we indicated, They ended on a quarter over quarter basis up just about $1,000,000,000

Operator

Thank you. We'll take our next question from Ebrahim Poonawala with Bank of America.

Speaker 5

Hey, good morning. I guess, two questions. 1, David, you referred to the Hyper volatility in the rates market, but would appreciate if you can address just fixed income trading, what happened there this quarter. Clearly, there was some lagged performance versus peers. To the extent you can just give us a flavor of what happened and your expectations around how things evolve from your How are clients' macro funds holding up in face of this volatility?

Speaker 2

Yes. So I appreciate the question. I mean, it's been interesting. This morning just watching what I'd highlight is I think we had a very solid quarter in check. We had nearly a $4,000,000,000 quarter and just to put that in perspective, I think that's a top decile quarter for that.

Speaker 2

I think we've had I think it was the 8th best fit quarter on record. I think we've had 96 quarters. So it was a solid performance and just the headline number of $4,000,000,000 the way we look at it, that's a very solid Q3. It was certainly a quarter that was volatility in client activity throughout the quarter. And I think we were well positioned to serve our clients and served our clients well.

Speaker 2

Some of the noise that I see just in the early morning release, our FICC business was down versus the Q1 of last year by 17%, but in the Q1 of last year, we had significant outperformance. If I remember correctly, our FIC revenues In the Q1 of last year, we're up year over year 21% when the competitor average was kind of flat or down. And you can go look at that from a base perspective. We had much more significant outperformance In the Q1 of 2022, because of our commodities business and the breadth of our commodities business. So if you remember back in the Q1 of 2022, The war with Ukraine started, there was more volatility in commodities and clients were very active in commodities.

Speaker 2

And so it was an outsized quarter in commodities in the Q1 of 2022. But overall, I think FICC performance in the quarter was strong. We were there to serve our clients. And by any standards, it was a good quarter. I think given the environment that we're operating in, I would expect activity to continue to be active with our clients.

Speaker 2

It's certainly an uncertain period of time There's a lot of movement and positioning and so we're finding our clients active at the moment.

Speaker 5

Got it. Thanks for that. And then Just separately, I guess, a big focus post Investor Day was picking up pace on asset sales. How does the environment over the last month influence That equity markets obviously held up pretty well ex the financials. So give us a sense of just asset sale pace of that, how you're thinking about that and any change This is Investor Day and how does that translate into piece of buybacks maybe in the back half of the year?

Speaker 2

Yes. So We commented in the script about the fact that we made more progress on the disposition of our historical principal investments And we highlighted that we reduced them from just under $30,000,000,000 to just over $27,000,000,000 during the quarter. Dennis also highlighted in his script that we feel on track to get to the $15,000,000,000 target number that we laid out over the course of the next 24 months. We feel good about that progress and we're going to continue to move to reduce that to 0 over time. There are a lot of positions.

Speaker 2

There's no question when there are market headwinds, some of that might go a little bit slower, but we're on pace with what we're trying to do and are committed to it. And obviously, we see a big change in that business as we grow management fees and we take the legacy investments out, the volatility in that business We believe will change meaningfully.

Operator

We'll take our next question from Christian Beaulieu with Autonomous Research.

Speaker 6

Good morning, David and Dennis. Just to follow-up on the question on the markets business. March did feel like a very tough month For some of your institutional clients, particularly we saw hedge fund closures, we're hearing of deleveraging. So how does that inform your view of the outlook For the trading businesses and your market share, particularly given, I guess Goldman's exposure to the hedge fund community.

Speaker 2

Our so I appreciate that question. We're obviously very focused on share and our share gain. We do Participate with the hedge fund community, but when you look at our big competitors, they participate very actively with the hedge fund community too. We also are very significant with the broad institutional community. As I said just in the previous question, Our clients are active at the moment because there's a lot going on.

Speaker 2

We're very focused on our market share. As we said in our Investor Day, we laid out More metrics and more of a focus on continuing to look at where we can advance our position with the top 100 clients that we deal with in our markets business. We continue to be optimistic about our share position, our overall ability to serve our clients and we do think in this environment clients will continue to be active.

Speaker 6

Great. Thank you. And then maybe a question on capital return. Can you just clarify why you are slowing buybacks? Your capital ratio seemed very healthy to your point that the stock is attractive at this level.

Speaker 6

So not sure that I get it. And then any comments on your appetite for strategic acquisitions here? There's been a lot of stress In the wealth management space, which is a space I know you guys are interested in, so curious here if you're conserving capital to go on the offense.

Speaker 3

Sure. Christian, it's Dennis. Thank you for the question around capital. And obviously, in this case, Appreciating the starting point in Q1 where we've significantly increased the amount of buyback activity in Q1. We remain very committed to return of capital to shareholders committed to sustainably growing our dividend, committing to the overall capital return profile, But we're also observing opportunities to deploy into the franchise on behalf of clients.

Speaker 3

And there are elements of uncertainty in the overall macroeconomic And so our expectations is that buyback activity will be moderated, but we'll monitor that over the course of the quarter. As you say, we do like the stock price and remain committed to return of capital to shareholders.

Operator

We'll take our next question from Steven Chubak with Wolfe Research.

Speaker 7

Hi, good morning. So I wanted to start off with a question on Platform Solutions. The business saw a step up in I just wanted to understand how we should be thinking about the trajectory for expenses in the segment and similarly for Provision going forward, just following this quarter's significant reserve release, we know you had accrued reserves pretty conservatively for that segment, but The top line momentum is good. Would just be helpful to get some perspective on how we should think about both the expense as well as the credit trajectory from here?

Speaker 3

Sure. Thanks. In terms of the overall trajectory for the segment, I think we have to step back. Our number one focus is driving towards Profitability, we also mentioned that we look to continue to improve the efficiency ratio. That's certainly over the course of a period of time, maybe not every given quarter, but we remain committed to what we outlined.

Speaker 3

As you say, we've seen good top line performance of the business. And on the reserve release Was a function of owning our point of sale business for some period of time, been able to observe it, take in more data. And GreenSky is actually Performing better than we had modeled. And so that was a contributor to the reserve release in the segment. As we think about it on a go forward basis, it's obviously going to be a function of origination activities across the platform.

Speaker 3

We now have a reserve level roughly 13% in the consumer space. So that can give you a sense of how to model provisions based on forward origination activity.

Speaker 7

That's great, Dennis. And just for my follow-up on expense and maybe more of like a tickety tack modeling question. The expenses were a bit higher than expectations, but I recall you noted at Investor Day the need to absorb some severance charges. You also had some pretty outsized, impairments related to the CIE portfolio. I was hoping you could maybe help us quantify the level of one timers in the This quarter just as we think about benchmarking versus some of your longer term efficiency targets.

Speaker 3

Thank you. Thank you very much. So let me take that in pieces. In terms of on the compensation expense, Yes. Any charges associated with severance and some of the actions that we took in the Q1 are included within our overall comp accrual, which is 33 percent of our revenues net of provisions.

Speaker 3

That's embedded inside of that number. In terms of the change in non compensation Expenses, they were flat on a quarter over quarter basis, but did include, as you know, 355,000,000 of CIE impairments. And so we thought it was important to call that out. And that also explains a bunch of the year over year delta between Q1 2022 and Q1 2023 that together with full quarter impact of NNIP helps explain the delta in that line for the Q1 of this year.

Operator

We'll take our next question from Betsy Graseck with Morgan Stanley. Hey, good morning.

Speaker 8

Good morning.

Operator

So just a couple of quick questions here. 1 On the consumer repositioning that you talked about today with the Marcus loan sales and with your comments around GreenSky, would you say that As those are done and dusted that would be it for the consumer repositioning?

Speaker 2

I think Betsy what we've said clearly is we're narrowing focus. We continue to be focused on our deposit platform and our credit card platform. I do think there are opportunities for us to do other interesting things strategically and how we think about operating it. But We're going to continue to examine all the things that we can do to make that as successful as possible. As I just highlighted, we don't think we're necessarily the best owner of GreenSky.

Speaker 2

So we're taking action on that and then we'll continue to move forward to bring the consumer platform, the card platforms to profitability.

Operator

And so there's some nice capital release that comes from that. How should we anticipate you're going to be utilizing that as we look forward here.

Speaker 3

So as we see the capital release from some of those activities, that just gives us incremental flexibility with respect to how we ultimately deploy that Either back in the franchise and or returning that capital back to shareholders.

Operator

Thank you. We'll take our next question from Mike Mayo with Wells Fargo.

Speaker 8

Hi. Just a little bit more on the consumer repositioning strategy. How much in the Marcus loans, I think they were $4,500,000,000 at year end did you sell? And what do you intend to do with the rest?

Speaker 3

So we sold about $1,000,000,000 of the Marcus loans, And the balance has been moved to held for sale and so we'll be looking at moving down that position over time.

Speaker 8

And so the marks that you took on these loans, what How much of those marks were in the $4,500,000,000 was on a subset or the entire portfolio?

Speaker 3

So we mark The entire we sold a portion of the portfolio and then we marked the balance to market and you'll see that reflected In the $470,000,000 number moving through net revenues, and our reserve release was 440,000,000 you think about the portfolio overall for the quarter, we generated incremental NII and we had other net pay downs. For the whole quarter, We generated revenues north of $150,000,000 and it was profitable for the quarter. As we move forward into 2,000 into the second quarter, We'll continue to generate that interest income on that portfolio and move down the balance of those exposures.

Operator

We'll take our next question from Brennan Hawken with UBS.

Speaker 9

Good morning. Thanks for taking my questions. I'd like to follow-up first on a question that Glenn asked about the transactional banking. In the past, in conversations, I believe that you've indicated that a lot of the competitors are the regional banks there. So I want to confirm that that's the case.

Speaker 9

And then given some of the stress that we've seen and concerns around some of those providers, how are you adjusting your strategy In order to continue to build on the momentum that you seem to have shown here in the Q1 and if we see that continued stress, Would you pursue inorganic venues to add scale or capabilities?

Speaker 2

Yes. So I appreciate the question, Brenna. We think in Transaction banking, we have a very good platform and a very good product. And the feedback that we're getting from clients about the product offering, how it works, What it allows corporate treasurers and CFOs to do is very positive. It's obviously attractive for us to take deposits, but we want deposits That are sticky on a year because people are operating on our platform.

Speaker 2

And so we're working hard to make sure as we're adding clients, we're bringing the value That it catches the technology to what they're doing in a way that grows that platform. We are seeing positive results, but this takes time. These are long cycle decisions. They're not day to day decisions and short term trades. As Dennis highlighted, we had good momentum in terms of Customer count where people added themselves to our platform.

Speaker 2

And so we're going to continue to focus on that. I do think given the size and the strength of Goldman Sachs As a GSIB and the way we're positioned, we're well positioned to compete with our clients for this business, coupled with the fact that we have an excellent product offering. So we are going to stay focused on that. We expect the business to grow over time.

Speaker 9

Great. Thanks for that color. Appreciate it. And then for my follow-up, you all just announced this morning the new deposit arrangement with Apple And the yield on that is pretty close to Marcus, a little above. How should we think about the economics of that Apple relationship and the deposit specifically?

Speaker 9

And then how do you manage potential risks for cannibalization with your own markets offering? Thanks.

Speaker 2

Thank you for the question. So obviously, this is something that we launched yesterday that gives us Another deposit channel, it's the opportunity for somebody that's credit card holder to put a deposit on. We've obviously looked very closely at the overlap between who holds Credit cards and who holds who has a market's deposit and that overlap is small, but we'll obviously watch closely to see whether or not there's any cannibalization, but this is a way for us to try to open up another deposit channel. And it's always good for us to broaden our deposit base. And so this is small at the moment and we'll watch it carefully, but I think it's an interesting opportunity for the firm.

Operator

We'll take our next question from Devin Ryan with JMP Securities.

Speaker 10

Great. Good morning, David, Dennis. I want to just touch on the equity financing Strength in the quarter, I know you kind of highlighted spreads and customer activity, but also appreciate this is an area of focus for the firm bigger picture. So just Love to think about kind of where we're jumping off of into the Q2 and whether the Q1 benefited from The March stress and that you maybe idiosyncratic things that happened during the quarter or if this is actually a reasonable kind of jumping off point and Just maybe a better outlook for that business for the rest of the year.

Speaker 3

Sure. I appreciate that question. I'll give you some context to help you understand sort of the Sequential activity and the direction. So our overall balances were a lot lower into the end of last year based Overall market levels and also as we reduced our footprint. And so as we came into the Q1, we're able to re expand the As the clients engage with us, we saw an increase in balances, increase in client activities, increase in customer spreads.

Speaker 3

We've had in place for some time A strategy to identify new types of clients that could come on to the platform and engage with us. And so I'd say that we're working sort of full speed ahead on that,

Speaker 10

Okay. Thanks, Dennis. Just a bigger picture follow-up here. So it feels like Goldman Generally takes market share during periods of stress. And so we just went through a pretty extreme period of stress in the bank And maybe we're getting on the other side of it, but perhaps not.

Speaker 10

And so with Credit Suisse now forcing Acquisition and capital likely becoming tighter in the banking system more broadly. Are there new areas of maybe opportunity for Goldman to take market share

Speaker 2

In

Speaker 10

terms of where you're going to lean in with your balance sheet as you've done in the past, how should we think about maybe a couple of the top areas where you feel like you can maybe incrementally take market share just a result of what happened over the last month or so.

Speaker 2

Well, I think our core banking and markets franchise is Incredibly well positioned. You can see the performance this quarter. I certainly wouldn't call it a top For investment banking, traditional capital markets, IPOs, M and A activity, but with a 16.7% ROE in our Banking and Markets segment, I think it's performing well. We have the breadth, the footprint, the global franchise, I think to continue to strengthen our share. And as I commented a little bit earlier, we continue to be focused on looking at our performance on the top 100, now expanded the top 150 clients and making sure That we're moving up and capturing share and serving them well.

Speaker 2

I do think given some of the things that have gone on, there are other opportunities. I think one of the interesting opportunities It's a private wealth opportunity over in Europe. We see lots of customers that had had accounts At both large Swiss institutions with a consolidation, we're certainly seeing opportunities in our private wealth business as people want to diversify The private wealth relationships we have, and so that's an area for share that we're focused on. So we continue to look across both Global Banking and Markets And also Asset and Wealth Management for opportunities that we can strengthen our position and we think both franchises are very well positioned.

Operator

We'll go next to Dan Fannon with Jefferies.

Speaker 11

Thanks. Good morning. Wanted to follow-up on the 3rd party fundraising. You had another great quarter, but certainly highlighted that It's been slow this year and I guess that's not surprising given the environment. But could you talk any kind of longer term as you think about maybe a rebound as The economic conditions pick up and also the cycling of your vintages of funds in terms of what could be coming online this year that might Result in continued strength or some pockets of slowness as you kind of go through that

Speaker 2

cycle? So thanks

Speaker 3

a lot for the question. Obviously, this remains a big area of strategic focus for us With $14,000,000,000 raised in the Q1 and now up to $193,000,000,000 we feel very good about that. We indicated that the pace could slow over the balance of the year, but we do have about 20 offerings in market on diversified Basis across asset classes, we're actively looking to raise funds. I think it's really The breadth and the diversity of our franchise is going to enable us to continue to raise those types of assets. Different strategies will play towards different types of environments and having the breadth of offering, I think is proving to be beneficial.

Speaker 3

So even though we indicated it may slow Later in this year, strong conviction that will be on pace for the total amount that we had indicated, just given what we see across our platform.

Speaker 2

And I'd just say, Dan, that one of the things that happens in this business is you scale and you have the breadth that we have in this business. We set a target for 2024, But there's a longer term goal and target and there's lots of room for us to grow and continue to expand our footprint and position given the offering that we have across the broad alternatives Spectrum, the global nature of our platform. And so this is still these are long dated fundraisings, long cycle stuff, but there's a lot of runway for us once we get past the 2024 target too.

Speaker 11

Thanks. And then just a follow-up, Dennis, on the expense side. The $1,000,000,000 of savings from realization of programs that you highlighted at Investor Day. What was realized in the Q1 or maybe just remind us of the pacing of some of those Savings as we think about the range of this year.

Speaker 3

So, at Investor Day, we outlined that over the course of the year, we'd have Run rate payroll expense of about $600,000,000 and non comp efficiency about $400,000,000 and we see about half That reflected in this year and the balance thereafter. I'd say we're on target for those initiatives And those efficiencies and we continue to look at it and we continue to see other opportunities to incrementally drive efficiency Across our platform, one area we had focused on for quite some time was overall level of professional fees. We continue to grind that down. And if you look at some of the sequential components of our overall non compensation expense, you'll see we're making good progress against most of the line items.

Operator

We'll take our next question from Gerard Cassidy with RBC.

Speaker 12

Good morning, David. Good morning, Dennis. David, in your comments about your principal investments, you mentioned obviously market conditions will impact How quickly you get to your targeted goal of $15,000,000,000 by the end of 2024. In those market conditions, is it more the IPO and ECM markets that have a bigger headwind for you in this area or is it just general market levels and the activity we're seeing?

Speaker 2

Well, I appreciate the question, Gerard. And I think all these things contribute. Financing availability contributes on certain assets. IPO market can contribute on certain assets and just general valuations contribute on certain assets. I want to put the comments in perspective because I think that Appropriately, we want to make sure people understand obviously that when there's a lot of volatility or there are tough markets, it might slow this down.

Speaker 2

But we laid out our Investor Day plan to move over the coming few years to close to 0 on the historical principal investments. We continue to have a target to get to $15,000,000,000 by the end of 2024. We're confident that we're going to execute on that target. So I think the way to think about this is we laid out a multiyear plan to reduce this down to close to 0 and we're moving along on that target. I wouldn't take the comments on any quarter to quarter basis.

Speaker 2

Things can slow down. I wouldn't overstate that. But I want people to be aware that if the market or the environment turns more difficult that could potentially slow us down. But we're very focused on this and we're going to continue to work to execute on a quarter to quarter basis.

Speaker 12

Very good. And I know you guys touched on the share repurchases Slowing it down a bit here in the second quarter, you're very well capitalized. If market conditions or I should ask, I guess, How important is it that the financial markets need to stabilize for you guys to maybe get more aggressive in the second half of the year and buying back the stock?

Speaker 3

Thanks for the question. Look, I think it just gets back to how we think about our overall capital allocation framework. We're looking at opportunities to deploy against our client franchise where there could be opportunities for incremental deployment given some of the Disruption that we're seeing in markets, we want to remain mindful of that. We want to remain committed to return of capital to shareholders. And so we're looking to strike the right balance While being mindful of the overall operating environment.

Speaker 3

Yes. And also I also just want to highlight, when we spoke at Investor Day, we said clearly that we are focused on accelerating Buybacks, that is still in place. Quarter to quarter may vary, but that is still in place. And so I just want that also kept in perspective too.

Operator

We'll take our next question from Jim Mitchell with Seaport Global.

Speaker 13

Hey, good morning. I think you hinted at improved dialogue levels in underwriting to start the quarter. So can you just give a little more color on what you're seeing in the market and maybe how you see the ECM and DCM environment evolving assuming we don't have another Major step back in the macro.

Speaker 2

Yes. I think there have been some green shoots. There were certainly some green shoots In February, levels are still muted. There are obviously a number of things out there that would like to get done and we're seeing Some indication of some significant transactions starting to prepare to get to move forward, given markets seem to have settled down a little bit. But I still think we're at a below trend level.

Speaker 2

As I said earlier in the conversation, history tells you That there's plenty of capital raising that needs to get done. Generally speaking, people have to use the capital markets to execute on their strategies. When you have these slowdowns or these windows close, they typically you get that rebalance after 4 to 6 quarters. We're kind of 5 quarters in. And so my expectation or hope is we will see improvements from what have been very muted levels.

Speaker 2

But at this point, we had a very volatile March And I'd say things are still slow, but we are starting to see some more green shoots again. And we'll just have to watch and see how things unfold in the quarter and into the back half of the year.

Speaker 13

Okay. That's helpful. And then maybe just on FIC financing. I know that's been a focus of growth as well outside of equities saw a pretty strong improvement in spreads and volume. It doesn't look like we saw that in FICC.

Speaker 13

Anything to think about it on the FICC side on the financing space and how you see that going forward?

Speaker 3

Sure. Still very, very committed to the FICC financing business, which as we indicated was up slightly year over year. There continue to be good opportunities to deploy on behalf of clients. I think a lot of the market share progress and client engagement progress that we've made over the last couple of years It sets us up as one of the go to calls for the provision of financing across the fixed space. So that combined with the equity financing Remain real priorities for our Global Banking and Markets business.

Speaker 3

We feel good about it.

Operator

We'll take our next question from Jeremy Sigee with BNP Paribas.

Speaker 14

Thank you. Good morning. Could I get you to talk a bit more about the Credit Suisse opportunity in Wealth Management? You mentioned Europe, But could you also talk a bit about Asia and Latin America? Are those regions where you as a firm have sufficient strength in Wealth Management To take more share from the Swiss banks, is that disrupted?

Speaker 14

Or is that a bit more marginal for you?

Speaker 2

On the second part of the question, I think when you look at Latin America, it's more marginal for us. But there is we really do have a global footprint And there are opportunities for us, especially as so many very wealthy individuals deal in dollars around the world. We also have Very, very strong Latin American presence that comes into our presence in Florida, obviously, where our private wealth business is focused on Latin America. So there is opportunity there. We continue to have a broad private wealth footprint in Asia.

Speaker 2

We haven't been as focused on growth and investment in Asia As we have been in Europe over the course of the last couple of years, we did launch a Private Wealth joint venture over in Asia over the course of the last couple of With ICBC, which I think is a small and slow opportunity, but is an opportunity for us. I think the interesting thing is whenever there is consolidation, as we look at Very wealthy individuals that are on their private wealth platform, they tend to have multiple providers. So whenever there's consolidation, there are opportunities to talk to people as people then rethink their footprint and the diversification of their footprint. And so our private wealth teams are very focused on that and the way we serve those clients.

Speaker 14

It's very helpful. Thank you.

Operator

Thank you. We'll take our next question from Andrew Lim with Societe Generale.

Speaker 15

Hi, good morning. So my first question is about your focus on credit cards on the consumer side. Perhaps you can talk more specifically about what you see as your competitive advantages there and how you think about sizing up In credit card in this point of the cycle, it's perhaps arguably quite late. And some would argue that credit card growth tends to be a reflection of Individuals not being able to manage their expenses in the high inflationary environment.

Speaker 3

Sure. Thanks. So as you know, we have our card platform business. We've been building that over the next over the last several years. We have partnership with General Motors, partnership with Apple, and we've been steadily investing in those relationships and building our balances.

Speaker 3

As you indicate, given the overall environment, the total balances actually were down sequentially, just given seasonality And given some of our credit underwriting standards and origination volumes, but this is a business that we continue to invest in and believe it's an overall piece of the firm that is diversifying.

Speaker 15

Great. Okay. I've got a second question, more broadly about the crisis that we saw in March and how you think about How it evolved and maybe the repo situation as well. So if we think about the SUV situation, Obviously, they decided to sell a lot of their assets below market value and in the process crystallizing a lot of Those losses. I guess in retrospect, it would have been a lot easier for them to repo those assets with the Fed and avoid those mark to market losses.

Speaker 15

And I was just wondering if you could share your thoughts as to maybe why that didn't happen. It would have been And obviously to avoid a lot of the crisis of confidence that emerged from that situation.

Speaker 2

I don't really have a comment on that, Andrew. There are a variety of factors of the actions that they took. Ultimately, there was a bank run at SVB and that led to the situation we are, but I don't I'm not going to go back and recount What decisions that management and that board made around that?

Operator

Thank you. We'll take a follow-up from Mike Mayo with Wells Fargo.

Speaker 8

Hi. First, Goldman specific and then general. The Goldman specific is why now on the consumer repositioning GreenSky Marcus Loans. And then more general question. To what degree did Silicon Valley impact the capital markets and the advisory Appetite out there.

Speaker 8

Thanks.

Speaker 2

Yes. Thanks, Mike. So first, why now? It's actually not why now, it's like Why over the last 12 months is, as you know, we made a strategic decision kind of 12 months ago at this point So really narrow our consumer focus and we've been executing on it. And it's not narrowing that focus and making those decisions and executing on it are not things That can be done instantaneously.

Speaker 2

So we've gone through a very, very thoughtful process and we're moving forward in the execution of that. Again, I think these things also, I just felt like they're small in the overall scope of Goldman Sachs. The market's loan portfolio It was profitable but small, wasn't strategic. GreenSky, as we highlighted today, we think it's good business, good platform. Actually as we watch it perform, it's performing well.

Speaker 2

But given the way we've narrowed our focus, not strategic for us. And so we're simply executing On the decisions that we laid out and we'll continue to execute on them to do the things that we think are right over time. On the second question, which is just what happened in March, how does it affect capital markets in M and A, I think it had an effect. It was a highly as I highlighted in my comment, it was kind of an unusual few week period with really, really outsized volatility. And As you and I have discussed before, whenever you have that kind of volatility, it slows down capital markets activity.

Speaker 2

So I thought we were starting to get a little bit more capital markets activity at the end of February. I noticed now equity markets seem to be behaving Well, debt markets are behaving reasonably well. I can't say that there won't be some other event that creates stress. There certainly are other things on the horizon That you could see that could create volatility like the negotiation around the debt ceiling, just to point to an example. But I do think when you have that kind of volatility, It slows down or it has people push out things that they were thinking about bringing into the capital markets.

Speaker 2

So yes, I do think it had an effect. And you can look at the performance in our Investment Banking lines in the quarter. It was certainly a pretty muted quarter for Investment Banking activity for us and for the market as a whole.

Operator

We'll take a follow-up from Ebrahim Poonawala with Bank of America.

Speaker 5

Thank you. Just one quick question, Dennis, maybe Around the Apple Savings Deposit, how do you intend to use the funds that come in? I appreciate early days in terms of the level of inflows that You may get on that product, but is that money just going to sit in cash earning Fed funds? Just trying to figure out what the NII revenue impact could be tied to those deposits?

Speaker 3

Sure. Thanks, Ebrahim. So Across the firm, we have multiple funding channels, multiple sources that we tap in our BAU activities. We have multiple Deposit channels that we also actively work with each and every day, we view this as one incremental And diversifying source deposits enables to deepen our relationship with Apple, tap into their ecosystem and the clients that we serve together who are cardholders and want to sort of take advantage of the ease of moving into deposit account. We'll take those deposits along with all the other deposits in our portfolio and deploy it into the client franchise.

Operator

That will conclude our question and answer session. I'd like to turn it back over to our speakers for any additional or closing remarks.

Speaker 1

Yes. Thank you all for calling. We appreciate the time and interest in the firm. And if you have any additional questions, certainly feel free to call me and the rest of the Investor Otherwise, we look forward to speaking with you soon. Thank you.

Operator

Ladies and gentlemen, this concludes the Goldman Sachs 1st Quarter 2023 Earnings Conference Call. Thank you for your participation. You may now disconnect.

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