Good morning. My name is Katie, and I'll be your conference facilitator today. I would like to welcome everyone to The Goldman Sachs Group, Inc. second quarter 2025 earnings conference call. On behalf of The Goldman Sachs Group, Inc., I will begin the call with the following disclaimer. The earnings presentation can be found on the Investor Relations page of The Goldman Sachs Group, Inc. website and contains information on forward-looking statements and non-GAAP measures. This audio cast is copyrighted material of The Goldman Sachs Group, Inc. It may not be duplicated, reproduced, or rebroadcast without consent. This call is being recorded today, July 16, 2025. I will now turn the call over to Chairman and Chief Executive Officer, David Solomon, and Chief Financial Officer, Dennis Coleman. You, Mr. Solomon, you may begin your conference.

Thank you, operator, and good morning, everyone. Thank you all for joining us. We delivered a strong performance in the second quarter generating net revenues of $14.6 billion, earnings per share of $10.91, and an ROE of 12.8%, resulting in an ROE of 14.8% for the first half of the year. Amid shifting market dynamics, we remained relentlessly focused on serving our clients with excellence. These results are a testament to our best-in-class talent, culture of collaboration, and differentiated business across investment banking, financing, risk intermediation, and asset wealth management. Our global client franchise has never been stronger, and I'm proud of how we've helped our clients navigate periods of heightened uncertainty. In investment banking, clients continue to turn to our number one M&A franchise for their most consequential transactions. The deal-making environment has been remarkably resilient. While activity was slower in the first half of the quarter, announced M&A volumes for the year to date are 30% higher year over year and 15% greater than the comparable five-year average. A narrowed range of outcomes on trade and the overall economy has helped CEO confidence and increased their willingness to transact. We've seen a pickup in momentum with both strategic and sponsor clients, as exemplified by Energy Energy's $12 billion portfolio and Salesforce's $8 billion acquisition of Informatica. Capital markets activity has also accelerated. During the quarter, we priced 11 IPOs for clients around the globe, including Circle, Chime, eToro, and HTB Financial Services, which have performed well on the secondary market. While uncertainty could persist in some pockets, particularly in industries highly sensitive to trade policy, we are optimistic about the overall investment banking outlook and we are incredibly well-positioned to assist clients in executing on their strategic ambitions. Our client engagement continues to be elevated, and we're seeing it in our backlog, which rose for a fifth consecutive quarter driven by advisory. Importantly, our advisory backlog was up significantly versus 2024 year-end levels. We've also remained active across our leading second equities businesses, which yet again produced very strong results in the quarter as policy uncertainty drove clients to reposition portfolios across asset classes. Our strong performance goes beyond the support of opportunity set. We are also benefiting from successful multi-year execution across our strategic priorities of driving growth in financing and prudently maximizing wallet share, which we have clearly added further balance to our performance. This quarter, both our financing businesses hit revenue records as we continue to deploy resources to grow fixed financing and bolster our leading position in equities financing. At the same time, we remain laser-focused on wallet share, and we now rank in the top three with 125 of the top 150 clients globally, up from 77 in 2019. Importantly, these hard-won share gains contributed to the demonstrated resilience of these diversified businesses. In asset and wealth management, we continue to have momentum in alternatives. We raised $18 billion this quarter, driven by demand for flagship funds across strategies, including secondary, hybrid capital, and growth equity. Wealth management client assets rose to a record $1.7 trillion. We're making solid progress on increasing lending to our ultra-high-net-worth clients, with loan balances of $42 billion. All in, our assets under supervision rose to a new record of $3.3 trillion, representing our 30th consecutive quarter of long-term fee-based net inflows. There are very few firms with this track record, and it is evident that clients continue to turn to us for our investment performance, quality of our advice, and the breadth of our offering. From here, we see further opportunities across alternatives, wealth management, and solutions, which will fuel growth and more durable revenues across our platform. As we continue to invest in further strengthening and growing our franchise, I am encouraged by the widespread progress being made in AI, which is quickly developing into an economic force that will permeate every industry. Accelerated innovation and disruption from AI is set to create significant demand-related infrastructure and financing needs, which will drive activity across our franchise. In light of the formation of the Capital Solutions Group, we've never been better positioned to meet this demand. With regards to our own operations, we are currently investing in a number of use cases across the firm to transform the way our people work. Last month, we rolled out our natural language GS AI assistant to the entire firm, the first generative AI-powered tool to reach the scale allowing for safe, secure, and responsible access to firm-approved external large language models. We recently began collaborating with Cognition Labs and are piloting the usage of Devan, an autonomous generative AI agent designed to transform the way we build, maintain, and develop software, with risk oversight and supervision of our engineers. We will be deploying these agentic AI developers for prioritized use cases, which we believe will significantly enhance velocity, transform our capabilities, and drive efficiency. As I discussed in our strategic update in January, operating efficiently is one of our key strategic objectives, and these efforts will allow us to continue to enhance the client experience while improving productivity. Before I turn it over to Dennis, I want to emphasize the significant progress we've made on all our strategic objectives. The investment we've made to strengthen and grow our global client franchise, including our emphasis on scaling capital-light businesses, have materially enhanced the resilience of our firm. I am pleased to see the results of these multiyear efforts reflected in this year's CCAR stress test, which drove a significant improvement in our expected stress capital buffer to 3.4%. This increased capital flexibility will allow us to prioritize deploying resources to support our client needs and further grow our world-class businesses. At the same time, we are committed to returning capital to shareholders, including delivering a sustainable and growing dividend. Our board approved a 33% increase in our quarterly dividend to $4 a share, which underscores our confidence in the durability of our franchise. Since 2018, we've increased our quarterly dividend by 400%. More broadly, we are encouraged by recent statements from regulators that a whole review of the financial services industry is warranted. For example, last month's proposal on the recalibration of the enhanced SLR is a constructive step to returning the leverage requirement back to its intended purpose as a backstop measure. A more balanced regulatory backdrop will foster a more efficient US economy. We look forward to further progress and we'll continue to actively engage with our regulators and government officials on this front. In closing, I want to recognize that despite the resilient global economy and market backdrop, much remains uncertain. Geopolitical concerns have intensified in many regions, notably in the Middle East. A number of trade agreements have yet to materialize, and the ultimate impact on growth from higher tariffs is yet unknown. At the moment, there's a sense that things are moving forward constructively. But developments rarely unfold in a straight line. With this in mind, we remain very focused on risk discipline. While we won't always get it right, I'm pleased with how our people harness the power of one Goldman Sachs to help our clients navigate the fast-evolving operating backdrop. I feel very confident about the forward trajectory of The Goldman Sachs Group, Inc. and as I said at the outset, our leading franchise has never been better positioned to support our clients, and we will continue to deliver returns for our shareholders. We'll now turn it over to Dennis to cover our financial results for the quarter.

Thank you, David. Good morning. Let's start with our results on page one of the presentation. In the second quarter, we generated net revenues of $14.6 billion, earnings per share of $10.91, and an ROE of 12.8%. We provide details on selected items in the bottom table, which in total reduced our EPS by $0.33 and our ROE by 40 basis points. Let's turn to performance by segment. Starting on page three, global banking and markets produced revenues of $10.1 billion in the quarter, with an ROE for the first half of nearly 18%. Turning to page four, advisory revenues of $1.2 billion rose 71% versus a year ago, reflecting strength in the Americas and EMEA. For the year to date, we remain number one in the lead tables for M&A, with a lead of roughly $85 billion in announced volume, and $145 billion in completed volumes versus our next closest peer. Equity underwriting revenues of $428 million were essentially flat year over year, while debt underwriting revenues of $589 million fell 5% amid lower leverage finance activity. Year to date, we ranked second in equity and equity-related underwriting, and second in both high-yield debt underwriting and leveraged lending. Across investment banking, our backlog rose sequentially for a fifth quarter, even with strong realizations, and remains notably higher versus 2024 year-end levels. PIC net revenues were $3.5 billion in the quarter, up 9% year over year. Intermediation results were driven by higher client activity in currencies, credit, and interest rate products, partially offset by lower results in mortgages and commodities. Record fixed financing revenues of $1 billion were driven by strong performance in mortgages and structured lending. Equities net revenues were a record $4.3 billion in the quarter. Equities intermediation revenues of $2.6 billion rose 45% year over year, driven by strong performance across cash and derivatives as clients were active in repositioning their portfolios. Record equities financing revenues of $1.7 billion were 23% higher year over year, and better portfolio financing results amid record average prime balances for the quarter. While balances declined modestly in early April, clients quickly re-levered, though net leverage overall remains at historically moderate levels. We continue to maintain robust risk discipline around our client financing portfolios. Total financing revenues of $2.8 billion rose 23% from the prior year, reaching a new record for a sixth consecutive quarter. We now comprise over one-third of overall fixed and equities revenues. Let's turn to page five. Asset and wealth management revenues were $3.8 billion. Management and other fees were up 11% year over year to $2.8 billion on higher average assets under supervision. Incentive fees were $102 million. We expect to make further progress on our target of $1 billion annual incentive fees over the medium term, with fees ramping up more materially in 2026 and 2027 as we continue to deploy and harvest funds. Private banking and lending revenues were $789 million, up 12% year over year, and higher results from lending and deposits related to our ultra-high-net-worth clients. In aggregate, our more durable revenues of $3.6 billion across management and other fees, and private banking and lending, were a record as we continue to invest in the growth of these businesses. Revenues from equity investments and debt investments totaled $82 million. Within equity investments, we saw modest net losses in our private portfolio driven by markdowns in relation to certain real estate positions. Given the more challenging harvesting environment, we expect results in the second half of 2025 to be more muted relative to our medium-term run rate expectations. In the AWM segment, we generated a 22% pre-tax margin and roughly 9% ROE in the first half of the year. Excluding the impact of historical principal investments, and its $3.8 billion of average attributed equity, our pre-tax margin and ROE would have each been approximately three percentage points higher. Now moving to page six, total assets under supervision ended the quarter at a record $3.3 trillion, up sequentially on $115 billion of market appreciation, as well as $17 billion of long-term net inflows in alternatives and equity, representing our 30th consecutive quarter of long-term fee-based net inflows. Turning to page seven on alternatives. Alternative assets under supervision totaled $355 billion at the end of the second quarter, driving $589 million in management and other fees. Gross third-party alternative fundraising was $18 billion in the quarter, bringing year-to-date fundraising to $37 billion. We continue to expect fundraising to be in line with recent years. On page nine, firm-wide net interest income was $3.1 billion in the second quarter, up sequentially on an increase in interest-earning assets. Our total loan portfolio at quarter-end was $217 billion, up versus the first quarter, primarily reflecting higher other collateralized lending. Our provision for credit losses of $384 million primarily reflects charge-offs in our credit card portfolio, as well as modest levels of growth across both the card and wholesale portfolios. Turning to expenses on page ten. Total quarterly operating expenses were $9.2 billion. Our year-to-date compensation ratio net of provisions remained at 33% and is inclusive of roughly $140 million in severance costs. Quarterly non-compensation expenses of $4.6 billion included approximately $100 million of CIE impairments, and rose 6% year over year driven by higher transaction-based expenses. Our effective tax rate for the first half of 2025 was 20.2%. For the full year, we expect a tax rate of approximately 22%. Next, capital on slide eleven. In the quarter, we returned $4 billion to shareholders, including common stock dividends of $957 million and common stock repurchases of $3 billion. Our common equity Tier one ratio was 14.5% at the end of the second quarter under the standardized approach. While the NPR on CCAR averaging is still outstanding, under the current regulatory framework, our new CET1 requirement will be 10.9% as of October 1st. Earlier this year, our board authorized a multiyear share repurchase program of up to $40 billion, providing us increased capital management flexibility. As David mentioned, our Board also approved a 33% increase in our quarterly dividend of $4 per share beginning in the third quarter, a reflection of our priority to pay our shareholders a sustainable growing dividend and our confidence in increasing durability of our firm. In conclusion, the quarter has once again demonstrated the power and resilience of our leading franchises. We remain incredibly well-positioned to support our clients as they navigate a complex operating backdrop. And we are confident that we will continue to deliver for shareholders. With that, we will now open up the line.

Thank you. Please stand by as we assemble the Q&A roster. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press star then two on your telephone keypad. If you're asking a question and you're on a limit yourself to one question and one follow-up question. We will take our first question from Glenn Schorr with Evercore ISI.

Hi. Thank you. So you've been doing a very good job of growing your financing business and expanding at the investment bank and trading. And it hasn't consumed that much capital. So we've been asking you for years, what are you going to do with all this capital if you do get regulatory reform? Well, here we are. You have a 10.9. You have a lot more than that, and you're making a ton of money. So, look, my blind question is, what do you do with all this excess capital now that you have it? Do you have places that you can allocate what is now large amounts of excess capital organically?

Yeah. Thanks for the question, Glenn. And, you know, I'll start and Dennis might add a few things on a more granular basis. But first of all, our capital methodology does not change. You know, with the capital regime adjusting based on what's going on regularly. You know, we start through a lens that if we've got capital available to deploy toward our client franchise, to produce accretive returns and to support client activity, that's going to be the first place that we're going to go. You know, given the way things are shifting, we are seeing some opportunities for deployment. Some of that comes from the structure of the capital stack, and some of that comes from the fact that activity is picking up particularly in M&A and financing in places we haven't had to put that much capital forward. So we do see good opportunities in the business to deploy that will be our first and primary focus. After that, we'll continue to look for ways to return capital. We've been committed to growing sustainably and meaningfully increasing our dividend as we've had more confidence in the durability of the business. And we'll continue to return capital. That continues to be our mantra around this. And you know, we think there are opportunities for us to continue to deploy and grow the business. That's where our primary focus would be.

No. Kinda just want to be ahead. Okay. And then maybe we could circle the square. You talked about it being a challenging harvesting environment. Yet at the same time, we have eyes and we see big booming investment banking pipelines and growing M&A and performing IPOs performing well. So what's holding up? What's different about the historical principal investments that we want to monetize amidst a good banking backdrop?

Sure, Glenn. It's Dennis. Thanks for that question. So I think we have both of those things happening at the same time. We have elevated asset prices. We have improving credit markets. We have increased opportunity for companies to access the IPO markets. We've seen that start to accelerate in the second quarter. But it also is the case that it has not been a robust environment for the harvesting, particularly for private equity-type portfolio assets. So in the case of our portfolio, we remain committed to reducing those historical principal investments over time. And we continue to make steady progress. We reduced it by about 10% in the quarter. Now stands at about $8 billion. And as market conditions continue to persist and they open up, that should provide us with incremental opportunities. We'll continue to reduce the other components of our historical principal investments in line with our strategy.

The only thing, Glenn, I just want to add to that. We're committed. This is now a small portfolio. But you know, it's common sense that when you get to the end of what was a very, very big portfolio, you know, you've got stickier things. We are committed to aggressively reduce that portfolio and are working very, very hard at it. But at the moment, you know, it's a small portfolio and we'll continue to play.

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

Hey. Good morning. I guess, just first question, Dennis, to follow up on capital. I think the 10.9 versus 14.5 CET1. There is a sense that maybe there could be some giveback on the SCB next year. Give us a sense of like, is there a CET1 ratio you're targeting against as we think about going forward and, obviously, it has implications for ROE. So how are you thinking about potential for SCB moving higher because of trading losses next year? And what's sort of the right CET1 target that we think about for Goldman going forward? Thanks.

Sure. Thanks, Ebrahim. And, obviously, we all recognize the environment remains fluid, and we'll have to understand exactly where we land on what our minimum requirements are and when they take effect. But I think in terms of our operating philosophy, we'd still expect to run with approximately fifty to a hundred basis point buffer versus the new and applicable regulatory minimum. We think that reasonable flexibility to have capacity and reserve to support unexpected types of client activity as well as to adjust to any changes across regulatory outcomes over the cycles. That's our current expectation, Ebrahim.

Got it. And just following up on sort of capital deployment opportunities, where does, if at all, inorganic acquisitions rank when you think about the use of capital?

Yeah. I mean, Ibrahim, you asked me this question before and we've talked about this extensively. You know, we are always looking for ways we can accelerate our franchise, and we've been particularly focused on thinking about ways we can accelerate our asset wealth management franchise. But the bar to do anything significant will be very, very high. And as we've said repeatedly, you know, there aren't lots of these things; they're generally not available. They're generally not for sale. But to the degree that there are opportunities, one of the things the capital flexibility gives us is the ability to think more seriously about some of that stuff. But I want to highlight with a very, very high bar around doing significant things.

Thank you. We'll take our next question from Betsy Graseck with Morgan Stanley.

Hi. Good morning. David, I just have a question for me on this topic. Is how do you think about the sizing of the dividend? Very impressive increase for sure. And I just wondered how do you think about how high to how what drove that decisioning as to where to set it? And how should we think about how high it could go going forward?

Sure. Sure, Betsy. And I think the most important thing that we're committed to is to be in a position to consistently raise the dividend and create a steady increase pattern of dividend increase. Unlike a number of our competitors that you would benchmark us to, we started from a very different place five, six, or seven years ago. And we had a nominal dividend, and we've been kind of growing into it as we've been growing the firm. We've been growing into getting to the place that we want a dividend and metrics around that dividend that are more in line with what these institutions do. Part of that was our confidence in the durability of our revenue, the business mix, which we've grown and we've executed on and we've improved, so we've moved it along accordingly. You can look at the same things we look at with respect to payout ratio, with respect to yields, with respect to dividend against our overall capital return plan, and evaluating this year given the growth of the firm. And the firm has had a step up in the growth of the overall firm and its overall earnings capacity. We decided that this more significant move was appropriate. I don't think you should expect the 33% increase in dividend every year. We are committed to growing the dividend steadily. And we'll look at those metrics that you would expect around payout and yield and try to find that right balance. But I do think given what's going on with the capital stack and the capital regime, and given the way we're executing on our strategy, which is allowing the firm to grow, there is room for us to continue to drive that dividend higher.

Oh, okay. Great. So payout ratio could inch up from here is what I'm hearing. And then separately on your expectations for how AI is going to impact your overall efficiency? I'm just thinking about drivers of revenue growth and expense savings. I know it's both sides of the equation with AI. How should we think about how much efficiency this can unlock over time? How are you thinking about it?

Yeah. We're spending an enormous amount of time on this, Betsy, and we haven't put public numbers out. But you should know that we've got detailed plans on things we're investing in and what we think they can generate. And I just say, for us and for others, not unique to us, this is a big opportunity. It's a big opportunity to automate processes, create efficiency and productivity, and processes, and it's not just to take costs out. Although there will be operating efficiency and cost that can come out. It's also to create flexibility for us to make investments in other things that can drive more growth in our client business. And so we're excited about that. I mentioned in my opening remarks this partnership with Cognition Labs in this program, Devon, if you think about all the software development you know, that we do and how important that is to service our clients and grow our business, this allows us to accelerate our ability to do that with this agenda capability to have our engineers guide software development at a much faster pace and a much larger scale. So it's both a productivity game that allows investment in growth, which is for the revenue side of your equation, but also, there's enormous operating efficiency in the firm and in other businesses. I think this is one of the reasons this is one of the tailwinds in the market overall; there's a big belief that as AI is deployed in the enterprise broadly, you can drive earnings growth and efficiency in a meaningful way. And so I think this is something to be quite excited about.

Thank you. We'll go next to Mike Mayo with Wells Fargo Securities.

Hi. You said earlier in the call you expect a lot of M&A for the rest of the year. And, I guess, we've been hearing that forecast for two to three years now. And so is it really happening now? Are these big strategic deals? What kind of deals? What geographies? And what gives you the extra confidence given that there's still some uncertainty out there? Thanks.

Yeah. Well, I mean, I'd highlight my point, you know, appreciate the question. I know this is something people have been very focused on. But I'd start by looking at the revenue accruals for the quarter, which are definitely an indication that there's been more M&A activity coming through the pipe. You heard my comments, Dennis' comments around the backlog, which was driven by advisory growth. And I just say, you know, anecdotally, the level of dialogue is significantly increased. And there are a variety of reasons for that. You know, one is I think from a regulatory perspective, there's a confidence level on the part of CEOs that significant scaled industry consolidation is possible. And so people are very engaged in that across a range of industries. Scale continues to be incredibly important to businesses broadly. I hear this from CEOs continuously. I just say the elevated level of dialogue is in a much different place than it was three to six months ago. And so we're encouraged. The metrics that we have that we can see backlog, new business opportunities, are up. And it feels like we're entering a period of a higher level of activity, and we're seeing that in the accruals that we saw last quarter. And, you know, as we enter this quarter, we're seeing a better level of accruals.

Mike, what I would add, because we get this question a lot trying to reconcile our performance and the change in our backlog with the ongoing uncertainty in the world, it is in terms of uncertainty, that clients typically turn to The Goldman Sachs Group, Inc. given our long-standing leadership position advising the biggest and most important companies on their most consequential transactions. And while there is persistent uncertainty, there is also opportunity. And what we're reflecting in our performance and our outlook is that we think that the clients that we're engaged with are seeing opportunities, and we're engaged in trying to help them execute.

And just to add, the last thing, Mike, not to be divorced from what I said in the script, announced M&A is up 30% year over year. Okay? That's a significant move, and it's higher now 15% than the five-year average. So there has been a move in activity that comes in revenue later, but that also gives us confidence.

And then coming full circle, as it relates to Goldman pursuing acquisitions, what would be the hurdle rate? What would if you dream the dream, what would you ideally like to pursue?

You know, I think what I said before when I guess it was Betsy that asked a question. You know, we are growing our asset wealth management franchise, and there might be opportunities to accelerate that growth in the scale of what we're doing there. That's where our focus would be. But I, you know, I don't have anything to add more specifically at this point, Mike. But, obviously, we're looking for opportunities to continue to scale and grow. The positioning of that asset management platform. It's a $3.3 trillion platform. It's very broad and diverse in what it does. But there's certainly opportunities to accelerate our scaling in certain places. We'll consider those things.

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

Hi. Good morning, David, and good morning, Dennis. Thanks for taking my questions. David, in response to Glenn's earlier question, you noted that you're still committed to reducing on-balance-sheet alternative investments. Following the Fed's decision this year to apply more favorable treatment in DFAST for those types of activities, it appears to have meaningfully reduced the burden for engaging in alternative investments. I wanted to gauge whether you would ever consider pivoting from your strategy to shrinking the investment portfolio just as you evaluate organic growth opportunities. Are these investments potentially ROE enhancing just following the Fed's decision to meaningfully alter or change the capital treatment?

So on the broad strategy, you know, I never is a big word, Steven, but we have no plans to change our strategy. You know, I would remind you, and I know you're deeply aware of this, we still do use our balance sheet to seed funds in our asset management business to co-invest in certain client situations, where we think that enhances our client franchise. But that's very different than running a full-on alternatives platform on balance sheet. We've pivoted away from that strategy. We think that as an asset manager, you know, this strategy where we use some capital alongside a broad management of other client capital is the right strategy. We're committed to that, and we're not gonna pivot from that.

But your point remains valid, Steven, in that the strategy is driven by co-investing with clients to drive the growth of the fund business. But based on the changes that have been made, that on-balance-sheet co-investment capital will be more favorably treated, we would expect on an ongoing basis. And present less of a returns headwind to executing on our prioritized strategy.

No. Thanks for that color. Right? And for my follow-up, just on the magnitude of STB improvement was quite encouraging. It appears that the bulk of it really came from more favorable treatment of atypical trading positions. I was hoping you can provide some perspective on whether you believe that the gains are durable. If you've done any additional analysis that would inform I know you've were asked about where you're comfortable running in terms of CET1. But just what you believe is durable or sustainable in terms of the gains that you realize as a year?

Yeah. So I appreciate the question, Steven. And I understand the focus on this, and I'd say a couple of things. First of all, at a high level, we have been executing on a strategy for a number of years that is less RWA dense. Your first question was specific to that. We've been executing on a strategy that is less RWA dense. And we felt over the last year, okay, when our SCB went significantly in the wrong direction. This year, we think we got meaningful benefit from the strategy we've been executing on for a long time. However, to your question specifically, I can't tell you why because I don't have transparency and I know you don't either. On exactly how the models work, why the models generated that, what the results were. In our advocacy, one of the big things that we're advocating for as the capital process is being reviewed, and there's a big meeting next week in Washington that we have, you know, somebody attending. Most of the institutions have attending. There's discussion, you know, around how the capital process should continue to evolve, and transparency is a big theme. This should be a transparent process so we can plan so you have transparency and understanding how we're gonna allocate capital. And so, also, we have a system that's not just durable, but also can deploy capital into the system to drive economic growth. And the lack of transparency around this at the moment is something that I don't think is good for the system. And so I'm hopeful that we'll have more transparency. It'll be a point in time we can actually answer this question and tell you what impacted this. But at a high level, we know enough to know we're running a strategy that is less RWA dense than it was. And we're gonna keep the flexibility to adapt until there's more clarity on these capital rules. I think we're gonna get more over the course of the next twelve months.

Thank you. We'll take our next question from Devin Ryan with Citizens JMP.

Thanks. Good morning, David. Good morning, Dennis. How are you?

Great. Good.

First off, not sure how I feel about having an AI named after me, but excited to see this evolve. But we already touched on that. So wanna ask a question just about, you know, David, you hit on ranking in the top three now with 125 of your top 150 clients, and that's up from 77 in 2019. So you're really making nice progress on kind of that strategy that you laid out years ago. So just remind us on some of the structural difference and how you're covering these clients today compared to the past. And, you know, how important is just increasing capital to those clients versus just the way you cover them? And then I know there's a focus on top 150 clients, but just these kind of evolution in coverage and how that's resonating, the opportunity to kind of employ that more broadly, you're across the franchise and just take more client wallet more broadly.

Yeah. Thanks, Devin. I appreciate the question. I think there are a handful of things that we've invested in and executed on over the course of the last year that have really driven our ability to gain these market shares. And it starts with one Goldman Sachs, and really, you know, a change in the overall coverage philosophy across the organization. This has been enhanced over the last few years by the bringing together of global banking and markets, which has enhanced activity and our ability to bring different aspects of the firm together and to deliver them seamlessly for clients. And we continue to work on doing that across the firm. It's been very effective. It's a different operating ethos. There have been significant behavior changes over the last five plus years in the firm in terms of the way people think about clients, think about servicing clients, think about meeting their needs, and think about getting resources the clients need in front of them. In addition, strategically, and I know you're aware of this, we have made a conscious effort to drive our financing business. And you create a connectivity with them that creates a virtuous cycle of more activity in your ecosystem. And so our investment in financing our clients is also at a very, very positive impact on those market shares and those activities. And so, you know, we're positioned well. You know, we talk about the top 150 because that's a significant chunk of the business, but there's a much, much broader client footprint. You know, I know you're aware that we cover about 12,000 clients in investment banking. We cover thousands of clients across our trading businesses. And so we're constantly thinking about ways that we can hold ourselves as an organization accountable for improving client relationships coverage and therefore shares and we're gonna continue to make that kind of a fundamental pillar of our client service value and really executing against our plan.

That's great, David. Thank you. And then just a quick follow-up on the broader theme of tokenization. I know we're still waiting for some regulatory clarity here, but we'd just love to get some quick thoughts on how Goldman is thinking about this as an opportunity, you know, how you're thinking about implications on market structure and just even how you may look to participate once we do get the green light. Thanks.

Sure. Sure. Obviously, the legislative agenda that's putting, you know, regulatory structure around stable coins and digitization is important. We're very focused on it. You know, I think this market structure bill that is yet to come is very, very important in the context of this in the direction of travel. We think there are a handful of places where there could be interesting opportunities for us, potentially around funding. We also think that the continued digitization of the financial system takes friction out and creates new opportunities. And so we've got a very significant group of people at the firm that are really deeply focused on watching the evolution of this. It's early to say specifically where we're gonna invest and exactly how this will play out we'll continue to keep you posted. And there's a heightened level of focus here inside the firm on how this will disrupt change the competitive landscape and create opportunities. And we're gonna make sure we're well-positioned to capitalize on that as that evolves.

Thank you. We'll take our next question from Erika Najarian with UBS.

Hey, Hi. Good morning. My first question is a follow-up. You mentioned that the ideal buffer to your CET1 minimums is fifty to one hundred basis points. But looking at your, you know, current standardized of fourteen five and clearly your potential new minimum of ten nine, you know, that implies a pretty significant buffer still. Implicit in David's earlier remarks is that transparency in the stress test is needed. But I guess what do you need to see either from a regulatory construct or anything else in order to work down that buffer even more significantly?

Well, so to obviously, all the comments David makes with respect to transparency and the details that underlie the results of the annual test and all of the models and exactly the inputs and outputs would be extremely helpful to calibrate the impact of each of the stresses on each component or part of our portfolio. More transparency, better. In terms of working down from our current position to the ultimate implemented regulatory minimum, it is a combination of finding the accelerated opportunities for deployment. David just went through a one GS look at how we're improving the coverage, improving our holistic coverage of clients, integrating the provision of financing to enhance the overall relationship. We have tons of clients across multiple segments of the firm that would like us to support them more with their desire for financing. We have a very disciplined, risk-sensitive, return-sensitive allocation process, given the historical levels of flexibility that we've had with respect to capital. That's not to say there are tons of professionals around the firm constantly petitioning us for more capacity to drive more progress with their clients. With this excess amount of capital, we can engage in driving the extra capacity that our clients are looking for from us, accelerate some of those business activities. We can also use return of capital through buybacks, etc. to reduce some of that buffer. So we will, as we said at the top of the call, stay true to our strategy, deploy where we can enhance client relationships, continue to return capital to shareholders, continue to advocate for more transparency, and hopefully get to a point in time where we have a very manageable and predictable equilibrium that supports both safety and soundness as well as ongoing growth across the economy.

Yeah. The only other thing, Erica, just stepping up at a much higher level that I think is important to recognize. And vice chair Bowman has talked publicly about this. There are three areas of change in the capital regime that are being discussed at the moment. One is ESLR and the proposal around that, which seems to be moving forward. The second is a discussion around G-SIB and the calibration of G-SIB. Because when you look at the significant increase in large bank capital over the course of the last eight years, let's say, a significant portion of that has come from G-SIB, and the lack of G-SIB calibration. And the third is stress testing SCB, the transparency around that and that overall process. More clarity on all three of those things allows us to drive toward more clarity on where our buffer is and where we're setting in. And so we're in that process. And my expectation is around those three things, there will be more clarity in the coming six to twelve months.

Got it. Thank you. Thank you. We'll take our next question from Dan Fannon with Jefferies.

Thanks. Good morning. If investment banking trends accelerate and we do see more M&A and issuance, can trading stay as robust as it has been, or do you anticipate some kind of moderation or slowdown within the markets business?

You know, Dan, I don't have a great way to answer that and speculate. What I would say is the follow-up. Our markets business is a very, very large, very diverse, very significant business. That operates globally, that touches all aspects and all asset classes across markets. You know, one of the things we see consistently, and I mean, you heard it in Dennis' remarks this quarter. There was strength in a bunch of areas, but there was weakness, for example, in commodities and mortgages. You know, next quarter, there could be strength in commodities. It's a very diverse business. And I really think what drives the size of the overall wallet is growth and activity in the world. And you would really need if you want to talk about the overall wallet and our participation in the overall wallet, you'd need a much more significant macro change. So an environment where there's a lot of investment banking activity, I still think is quite constructive for our markets business.

Thank you. That's helpful. And just as a follow-up, I'm just curious about how you're thinking about alternative fundraising within the broader wealth channel or more mainstream retail. We've got potential changes around alternative assets being added to retirement accounts. How are you positioned to capitalize on this opportunity?

Yeah. Thanks for that answer. This is something we've been very strategically focused on. You know, as you know, you know, we don't run a warehouse or a platform like that, but we have been building third-party wealth distribution partnerships very actively. We have a big team here. It's been very focused on it. We've been in active discussions around partnerships with others in the retirement channel, and we see this as a pretty significant opportunity. And one of the things that's just interesting to me, you know, following the news, but with the news around, you know, the administration weighing in on this, there have been a bunch of people mentioning firms that would benefit from this. I haven't seen The Goldman Sachs Group, Inc. mentioned as benefiting from this. The Goldman Sachs Group, Inc. will benefit from this. And so we're excited about the opportunity and extremely focused on it.

Thank you. We'll take our next question from Chris McGratty with KBW.

Alright. Thanks for the question. In your prepared remarks, you talked a lot about building a sustainable revenue model, less volatility. If we kind of step back and think about the medium-term ROE that you've talked about, fifteen to seventeen percent, is that like, because part first part of the question, is that still the right level given what's going on in the environment and then the regulatory environment? And two, if that is the case, what's gonna be the driver? A numerator or denominator from here? Thank you.

So first, Chris, welcome to the call. I'm delighted to have you. You know, we have been talking about our ability to drive the firm to mid-teens ROEs, slightly higher than what you just quoted, ROTEs. What's going on from a regulatory and a macro perspective gives us a higher level of confidence in our ability to deliver on that. You know, that's where we are. We're delivering on that. I think we feel very good that the combination of the growth we're driving in our asset wealth management business, which continues to improve margins, continues to improve returns, is helping us off the firm's overall returns and our global banking and markets business is obviously performing at a very, very high level. At this point in the cycle. That will move around through the cycle, but we're very confident in that business's ability to deliver mid-teen returns through the cycle. And so it's the continued execution and asset wealth management that's uplifting those returns.

And, Chris, I mean, just to follow-up on it, I'm sure you see this clearly, but the returns that we've been generating have been with the quantum of capital that we've been required to hold. Excess capital both gives us capacity to drive extra activities with clients and also gives us capacity to run with a lower denominator at the same time. So that is a dual sort of beneficial source of tailwind that is part of and an accelerant to the already existing strategy.

Thank you. We'll take our next question from Saul Martinez with HSBC.

Hi. Thanks for taking my questions. I'll just wanted to follow-up on maybe Betsy's question on the dividend and ask it a slightly different way. It honestly suggests greater confidence in how you're thinking about the durability of your revenue and earnings power. But is there how do we think about it? Or what does it imply about how you see your own core earnings power? If we were to assume, for example, a one-third dividend payout ratio would imply, you know, twelve dollars a share or forty-eight dollars annualized. And earnings power, obviously, then you know, over time you grow from that. But I mean, is that an overly simplistic way of thinking about it? Or does it is the dividend, you know, can we draw conclusions about what it implies about how you're thinking about your own core earnings power today?

Yeah. I would say the following, Saul, for that question. The firm has enormous core earnings power. You know, we think we've built a more durable firm with more durable revenue. We talk a lot about our durable revenue growth across asset wealth management, across other parts of the firm. And we continue to execute on that. As we create more durable revenue growth, and we continue to prove out the durability of our businesses, you could make arguments that the payout ratio on the dividend, given the amount of capital we generate should be higher than it currently is. It's obviously not near, you know, thirty-three percent at the moment. But we are comfortable with where we are. Our goal, and I want to emphasize this, is to have a sustainable consistently growing dividend. And that's a big reset from where we were because we had a very nominal dividend. And so we're on that journey, and we're gonna continue to move in that direction. But I'm not gonna speculate around payouts or other things other than the amplifier or strategy of building more durable revenues and growing the overall firm and franchise.

Okay. That's fair and that's helpful. Maybe I just quickly follow-up on advisory. You know, I get the reasons to be optimistic and, you know, now it's M&A up, you know, thirty percent and, you know, the potential for, you know, improved revenue. But this quarter, you know, you did I think Dennis, you mentioned that you widened the gap versus your peers and, you know, the revenue number and the fee number this quarter was well above, you know, what your next closest competitor reported. And I'm just curious, you know, if there's anything additional that you can comment on there. What drove that and, you know, what's driving, you know, the much better results in the durability of that gap relative to your competitor?

I, you know, this is an extraordinary franchise that's been a leading franchise for over twenty-five years. It continues to be a leading franchise. You know, our performance this quarter on a relative basis was quite strong. You shouldn't interpolate that that means every single quarter it will be this strong. I think when you look, you know, year to year to year, we have a leadership position and that leadership position if we continue to execute should be sustained. That has some quarters where we way outperform, and some quarters where we just, you know, outperform by a little bit. This was a quarter where we outperformed more. But the strength of this franchise, the way we're positioned, the investment we make in this franchise, you know, we're confident in an improved M&A environment. You know, we're gonna have leading share and continue to work hard to protect that position.

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

Hi, Dennis. Hi, David. David, you mentioned in your comments about inorganic growth. And I apologize if you addressed this and I missed it. But you talk about the high bar that it would have to, you know, meet to for you guys to maybe to pursue something if something comes up that you can look at. Can you kinda frame out what that high bar do you look at it from a dilution of earnings or tangible book value or return on net investment? Can you frame that out for us?

I mean, we obviously would look at all sorts of financial metrics, Gerard, in thinking about an acquisition. But let's start with strategically, what are we trying to do in the business and how does the business that you're acquiring advance the strategic mission? And so, you know, first and foremost, there's gotta be a strategic fit in terms of things that we're prioritizing in the growth of our asset wealth management franchise. Secondarily, these are people businesses. Have to have enormous confidence in the people, knowledge in the people, the cultural issues, etc. And then, of course, you know, there's financial analysis around that. Which really gets to, you know, what do you pay for? This is why the bar is high, though, to doing these things. Because to get all that stuff to align on a property that's available, it's a high-quality property is a very hard thing to do.

Got it. No. Thank you. And then as a follow-up question, your results speak themselves on the strength of investment banking and trading. And in the environment that's has a lot of uncertainty and risk, you know, geopolitical risk is at the top of the list. What do you worry about as you go forward in view of, you know, putting up very good results with all the risks that we're currently seeing? What concern is there anything that concerns you as you look forward?

Well, there are always things that concern us. Our job is to worry a lot about things that have a small probability of happening and make sure we're prepared to navigate in those environments. The firm has an extraordinary focus on risk management, and we know, doesn't matter how good things are. We're always focused on risk management and what if, you know, what if this, what if that. I would say, but a super interesting highly uncertain environment. And you just look at the last quarter, you know, the change in sentiment and the environment and policy positions geopolitics just in the last three months have been significant. I'd also say, you know, we participate in a very large, very diverse, very resilient global economy. And, you know, we're seeing the ability of the global economy to absorb and navigate some of this policy uncertainty quite well. But we're gonna stay vigilant from a risk management perspective. And it's never a straight line. Never a straight line. And so, you know, I'm sure just as it was in this quarter, there'll be unexpected surprises in the next quarter and the quarter after that. But we're gonna be focused on our clients, focused on helping them navigate it. And when we do that, we take a long-term view. This firm tends to perform quite well.

Thank you. At this time, there are no further questions. Ladies and gentlemen, this concludes The Goldman Sachs Group, Inc. second quarter 2025 earnings conference call. Thank you for your participation. You may now disconnect.