Good morning. My name is Denis and I will be your facilitator today. I would like to welcome everyone to the Goldman Sachs third quarter 2020 earnings conference call. This call is being recorded today, October 14, 2020. Thank you. Ms. Miner, you may begin your conference.

Good morning. This is Heather Kennedy Miner, Head of Investor Relations at Goldman Sachs. Welcome to our third quarter 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. Note information on forward-looking statements and non-GAAP measures appear on the earnings release and presentation. This audiocast is copyrighted material of the Goldman Sachs Group Inc. and may not be duplicated, reproduced, or rebroadcast without our consent. Today I’m joined by our Chairman and Chief Executive Officer, David Solomon, and our Chief Financial Officer, Stephen Scherr. David will start by reviewing third quarter and year-to-date performance. He will also provide an update on our client franchise, the macroeconomic backdrop, and our progress on returning to office. Stephen will then discuss our third quarter results in detail. David and Stephen will be happy to take your questions following their remarks. I’ll now pass the call over to David. David?

Thanks Heather, and thank you to everyone for joining us this morning. I’d like to start by saying that all of us at Goldman Sachs hope that you, your friends and family remain healthy amid the continuing challenges with COVID-19. Let me begin on Page 1 of the presentation with a summary of our financial results. In the third quarter, we produced net revenues of $10.8 billion, up 30% versus a year ago. The strength and breadth of our client franchise continued to be evident this quarter as we delivered net earnings of $3.6 billion, record quarterly earnings of $9.68 per share, and a return on equity of 17.5% and return on tangible equity of 18.6%. Our third quarter results contributed to strong year-to-date revenues of $33 billion and an ROE of 8%. Litigation costs burdened our year-to-date returns by over 500 basis points. Returns were also impacted by higher reserve build for credit losses in the first half. The third quarter continued to demonstrate the strength of our diversified business. We benefited from an improving market backdrop, high levels of client engagement, continued countercyclical performance in market making, and positive momentum across our strategic initiatives. We maintained our leading global position in M&A as announcements increased in the quarter from a relatively dormant period earlier in the year. We maintained strong lead [ph] table positions in underwriting, including a number one ranking in equity underwriting and a top three ranking in high yield, with both markets very active during the quarter. We again delivered robust performance in global markets in both FICC and equities on solid client activity across our global platform, reinforced by recent market share gains across asset classes in the first half of 2020. In asset management, we recognized strong gains from our public and private…

Thank you David, and good morning. Let me begin with our summary results on Page 3. During the third quarter, the firm performed well across all four of our business segments. In investment banking, our corporate clients remained very active in raising debt and equity capital. We also saw an increase in strategic dialog following a more dormant period for M&A activity earlier in the year. In global markets, client engagement remained high as we gained share during the year and enabled clients to manage risks across asset classes. In asset management, strong growth was driven by higher management and other fees as well as gains from our long-term equity and credit investments following a more challenged first half of the year. We also saw double-digit revenue growth in our consumer and wealth management segment as we expand our service offering to individuals across the wealth spectrum. With those headlines, let me now turn to our specific business performance on Page 4, beginning with investment banking. Investment banking produced third quarter net revenues of nearly $2 billion, up 7% versus a year ago. Financial advisory revenues of $507 million declined 27% versus last year on fewer transaction closings in the quarter, reflecting the lower level of client activity in the first half of the year. Nevertheless, year to date we participated in over $630 billion of announced transactions and closed approximately 225 deals for $810 billion of deal volume. We maintained our number one position in both announced and completed M&A lead tables by a meaningful margin. Importantly, the pace of M&A announcements has picked up considerably in recent months. Our announced deal volume in the third quarter was up more than fivefold versus the second quarter and our investment banking client dialogs remain active. The bigger headline in investment…

[Operator instructions] Our first question comes from the line of Glenn Schorr with Evercore. Please go ahead.

Hi, thanks very much. Obviously, great trading results. I’m curious if you could characterize any--how you think about any incremental risk you take to execute all that, and if there’s any impact on future stress tests. I’m just looking to balance client franchise with any risks associated with it. Thanks.

Sure Glenn, thanks. I would say the performance of the trading businesses in the third quarter, frankly like it was in throughout most of the first part of the year was really done with an eye toward high velocity turn on balance sheet; that is, we were very well prepared to commit capital to facilitate intermediation but saw our mission equally as moving and trading on that risk very efficiently, and so we could see the kind of turnover that we needed. We didn’t see dramatic pick-up in risk occasioned by that pattern and that strategy, and I think that leaves us in a good position with respect to what we will submit as part of the second version of CCAR, and I don’t see our risk as being unusually elevated in the context of producing these kinds of results.

That’s great. Then I missed it - I don’t know if you gave us the realized versus unrealized split. I think I wrote down everything you said on the equity -- I’m talking the equity investment line, I couldn’t tell how much of it was actually realized. The lead or the follow-on to that is, have you considered monetizing more with markets at all-time highs? You have a pretty seasoned portfolio with two-thirds in the four to eight years old-plus range, so I’m looking to see how you balance the capital intensity of those investments with the earnings power and what your capital deployment options are right now. Thanks.

Sure, no problem. Let me just go through the breakdown in equities. Of the $1.4 billion in revenue, our public portfolio generated $781 million in revenue, and the private part of the equity portfolio generated $642 million. Now importantly, when you look at the private portfolio, $284 million of that $642 million was generated on events, so that’s sales, monetizations, IPOs, and the like, and $52 million - only $52 million - was non-event driven, that is looking at the baseline performance of the underlying company and making a judgement about where value is appropriately pegged, and so event being the dominant component of the private portfolio. The balance, I should point out, of $306 million relates to CIEs. As it relates to the public portfolio, we observe the market no differently than you do. Obviously, there’s a certain component of that public portfolio that remains restricted. A decent amount of it remains unrestricted, and we will look for opportunities as we have been to monetize those stakes. By the way, I say that not just simply in the context of an attractive market valuation in which to sell but equally in the context of the kind of broader strategic mission we’ve been on, which is to lower the balance sheet intensity and capital intensity of that as we shift to more third party investing itself, and so that you a bit of the lay of the land as to the two components to your question.

Thanks so much. Appreciate it.

Sure.

The next question comes from the line of Christian Bolu with Autonomous. Please go ahead.

Good morning David and Stephen. Maybe sticking with the trading question, Stephen, you gave some pretty interesting color on why you think trading revenues should be sustainable into 2021. Can you expand on those a bit? I’m particularly interested in your point around LIBOR transition? Just give us more detail there and sort of why you think Goldman is well placed to capitalize.

Sure, so why don’t I start with trading. I think at the core, our view on sustainability is not with a crystal ball and a forward forecast as to what the opportunity set will be. It is more rooted in the fact that over the course of the year and looking at data through the first half, we have picked up meaningful market share in and among various client sets across all of the businesses in our trading business. This was a very concerted effort on the part of the leadership of that business to go at finding ourselves moving up the ladder in the top 1,000 clients that matter to the trading division. The sustainability of our performance for me is rooted more in the fact that we’ve picked up share gains. We were there for clients particularly during the most volatile moments of the second quarter across all asset classes without withdrawing, and I think it sets us up to capture whatever the opportunity set is on the forward. My comments in the prepared remarks is that as I look forward to the fourth quarter, we can count on any number of issues to be the source of some volatility, whether that’s U.S. election, LIBOR transition, the trajectory of COVID - any one of those, and part of the reason that we are at capital levels we are, part of the reason we have maintained higher liquidity than we ordinarily would, is such that we can serve clients should that volatility occur without putting ourselves offside on any one of those metrics. I think that’s part of the color I’d give you both in terms of what’s sustainable, and equally why we feel confident that we’ve put our financial resources in a proper frame to play on the volatility itself. Just lastly on your question about LIBOR transition, we’ve had a dedicated team - I mean, people who are 100% dedicated to this effort from the beginning. We’ve put ourselves in a position where we’ve done issuance, we have prepared ourselves in terms of counterparty contracts and the like, and I think we’re very well prepared. Obviously, we don’t skew in ways in which commercial banks do with LIBOR based elements in mortgages and the like, but in the scope of what is our business, we feel quite well prepared for that onset.

Great, thank you. Maybe switching to acquisitions, again maybe David this one is for you, given the frenzy at Morgan Stanley on deals, just curious how you’re thinking about M&A, maybe what businesses or initiatives would benefit from an acquisition, and then if you can just touch on how you think your relative currency and capital position places you to do a transformative deal.

Christian, I appreciate the question, and of course we laid out a medium-term plan with a set of goals, and you and others continue to ask us about this. We’re on a journey to continue to strengthen our returns and broaden our business to create a more diverse business with more sustainable revenues over time. We now have the business, we think, fully set up and organized after we re-segmented last year and made some changes internally so that the platforms that we think we can really operate from are well positioned to grow, and this includes our two more traditional platforms that everybody is always focused on, investment banking and global markets, which really for lack of a better term is a corporate investment bank. We have a big asset management platform which is global, broad, deep, multi-product all over the world, and we think there are opportunities to continue to grow that organically for sure, but certainly we’d consider inorganic opportunities to grow that if we thought that they were enhancing. And then, we obviously are building a broader consumer wealth platform to serve individuals and we certainly think there can be opportunities to accelerate the growth of that. In fact, last year we made an acquisition in United Capital that we think accelerated our expansion into high net worth wealth in a meaningful way, and we’ve now been integrating that quite successfully. So we continue to look broadly at things that can extend our strategy and accelerate the pace. It’s clear if you look at the actions of others that the market has been tolerant of tangible book value dilution in the context of something they think is on strategy and advances the trajectory of the business, so we’ll continue to look and see if there are opportunities; but other than that, it would be hard for me to say anything more at this point.

That’s helpful, thank you, David.

The next question comes from the line of Mike Carrier with Bank of America. Please go ahead.

Good morning and thanks for taking the questions. First one, just on your efficiency ratio, you guys beat the 60% this quarter and year to date, ex the legal, you’re at the 60%. I guess the big takeaway is the operating leverage clearly works in the model, but can you provide some color of maybe where you’re at in the investment and efficiency three-year timeline? Most of it is just to help with the expense trend line - you know, the efficiency ratio outlook, depending on how the revenue backdrop plays out.

I’ll start and Stephen might give some more granular detail, but I’d say that at a high level, Michael, and appreciate the question, there’s no question that our efficiency has benefited from an environment which has allowed us an opportunity in some of our businesses to capture more revenues, and some of that, as Stephen highlighted, is really due to market share gains and we think that will be more sticky. Some of it is due to the environment. There is no question as we looked at our three-year trajectory and thinking about our desire to run the firm more efficiently that this environment and the crisis slowed down some of the actions we might have taken during this year. We’ve now begun to deal with some things from an efficiency perspective that we might have dealt with earlier in the year, and we then have two more years to go through and execute that plan. We continue to be very committed to that plan. We continue to be very comfortable with that plan. We actually think there might be things that we’ve seen or we’re learned that may create more opportunities for us to advance from that plan, but at this point our intention is to give you a more detailed granular update when we review our plan in January at the next earnings call. Stephen, is there anything you’d want to add to that?

You know, Mike, the only thing I would add to David’s comment is that I think that on the forward, we’re going to continue to look at strategic value locations as areas where we can grow and develop a number of different businesses, particularly the newer ones. I would say automation continues to be a priority for us across the whole of the firm - you know, automating what goes on in risk and the various control functions, and equally automating platforms that have captured the attention of client sets. I’d also say that--look, it’s hard to look at one quarter as a spot for efficiency. Obviously it’s important to look out the whole year, but equally this is a medium term journey that we’re on, and I think some of those will--some of the items that I mentioned, that David mentioned will bear fruit in terms of creating greater operating leverage. The last thing I’d say is that we have said on prior earnings calls that it’s important to look at operating expenses in totality because as we continue to build businesses like transaction banking, like the consumer business, they will be less human intensive, they will be more automate, and therefore we move away from the compensation intensity associated with those businesses as a general matter. I think there are a number of levers to pull over the medium term.

All right, that’s helpful. Just a follow-up on Glenn’s asset management question, one of the things we’ve seen in some of the private companies is they’ve been slower to rebound, given the economic backdrop, so any insight you can provide on the private portfolio companies, either those facing more COVID-related pressure or those that aren’t, and if that will have an impact beyond the pace of monetization.

Sure, so as we looked across the portfolio and we did it in the first quarter, did it in the second and again did it in the third, we look at those that are most acutely impacted by COVID. Their circumstance in some sense hasn’t changed, and they remain untouched from the downward mark pressure and valuation that we saw in the first and second quarter. There are others that have turned the corner as being affected by COVID, and that is as much a function of where the market is moving, where consumers are moving and the like. Then there are others that historically have been untouched by this, and so I would say we continue to look at it through the frame of COVID impact and equally we look obviously at the underlying performance of the business, and not exclusively as against public market comparables and the like. By the way, this is of course for that part of the private portfolio not otherwise marked, given other events that are going on, so that frame remains the same in terms of how we look at that portfolio itself.

Your next question is from the line of Betsy Graseck with Morgan Stanley. Please go ahead.

Hi, good morning. This is Manan Gosalia on for Betsy Graseck. I wanted to ask on your capital levels, I know you said you expect to manage to about a 13% to 13.5% CET1 ratio over time, but can you speak to where you expect to maintain capital in the near term, at least until the 2021 stress test? Do you expect to maintain the same buffer over your required minimum as you did this quarter, or--you know, I know you mentioned that you could see strong activity in the markets in 4Q with the election and the market rebound. Is there more room to be a little bit more nimble and maybe increase exposure and market RWAs in the fourth quarter?

Sure. I think we’ve brought our CET1 ratio to 14.5% really to sort of fix ourselves in a competitive position in anticipation, as I said, of the potential for volatility and higher trading over the course of the fourth quarter. We’ve said before and I’ll say again that we run roughly with a 50 to 100 basis point buffer. Where within that range we stand, obviously at the higher end now, is equally a function of volatility from a risk management point of view - that is, we’re in a market that is more likely to express higher, not lower. As and to the extent that that volatility subsides, we will see the buffer come down and will adjust, again consistent with where we are. On the longer term trend, over the medium to longer term, the reinforcement of 13% to 13.5% is more a reflection, I think as I’ve said in the comments, of a forward direction to create, and as David noted, lower stress loss impact in the overall composition of the business, meaning as we continue to pursue certain of our strategic initiatives which create more durable fee-based revenue, lower capital intensity, lower balance sheet intensity, we’ll be in a position where I think the requirement of us will come down and therefore over the medium term, we’ll move more in that direction.

Great, thank you. Can you talk a little bit about what you’re seeing on the M&A advisory front? We’re seeing the announcement come through, both your own and the industry, M&A announcements have been pretty strong in the third quarter. Can you give us some more color on what you’re hearing from corporates and sponsors, and how long do you think this increase in announcements can persist into next year?

There’s no question that earlier in the year, given the dramatic nature of the start of the pandemic and the uncertainty that persisted, M&A activity came to a screeching halt, and really through the second quarter, new announcements and activity levels were quite low. Stephen made comments with respect to the pick-up in our backlog. We’ve seen an increase in activity. I think we see an increase in activity and announcements but also an increased dialog, and I would say that CEO confidence has improved meaningfully in the quarter. It’s still not at the high elevated levels that might have been at the beginning of the year, but CEO confidence and the dialog we’re having is certainly improved. Against that backdrop, I would expect to see numerous companies trying to take advantage of the opportunity to consolidate and strengthen position. I think one of the things that’s going on in the crisis is people are seeing that there continues to be efficiency in scale. As the world continues to digitize, it requires greater investment, and that obviously advantages companies with scale. Our base case, based on what we’re seeing, is that his increase in activity will continue through the rest of the year into 2021, but I would say that you’ve got to be flexible and understand that if for some reason, the course of the pandemic or the economic trajectory changes some of that confidence that’s currently building, that could slow down, but at the moment activity levels appear quite good.

Your next question is from the line of Brennan Hawkin with UBS. Please go ahead.

Good morning, and thanks for taking my questions. David, you referenced that you’ll be providing an update to the strategic goals and targets that you laid out on the fourth quarter call, and you said you are committed--you remain committed to those goals, so that’s encouraging, certainly in light of some of the stories we’ve seen in the press which were a little confusing. But I wanted to, number one, confirm that the--a refute of the press reports that you are considering backing away from those targets and also hear how loan and deposit growth experience through 2020 has compare to your pre-pandemic expectations, and how long should we think about a headwind from the liquidity, the excess liquidity that you guys are holding as a hindrance to NII. How temporary is that likely to be? Thanks.

Okay, so a couple things. First, and I just want to be very clear about it, it’s one article. I saw the article. The article was wrong, it was incorrect. We’ve never considered changing our targets. There’s been no discussion about it, so we’re committed to our targets and we’re making progress on our targets. I don’t have anything really else to say about the article, other than it was incorrect. With respect to the second part of your question, and I’m sorry - I’m now on the third part of your question, where you’re asking about deposits. There was something in the middle, right?

Loans.

Oh, about--

Lending.

Lending versus our expectations before the pandemic.

Sure, so when you look at deposits--that’s right, deposit growth and loan growth. When you look at deposit growth, what I’d say, and we talked about this in last quarter’s call, deposit growth and the acceleration of our ability to attract digital deposits definitely accelerated during this year because of the pandemic, faster than we had expected. We’ve obviously been managing that flow, and you saw in this quarter based on actions we took that we slowed down the growth in that deposit rate because we had well exceeded what we expected to do for the year. At the same point in time, when you look at the consumer business which still remains very, very small, as we entered the pandemic we had the ability to be more controlled on the growth of that portfolio. We remain committed to the targets we set out in our investor day in January, but it didn’t seem as we entering the pandemic and there was such uncertainty during the bulk of this year, that we should be leaning in toward driving those targets. My expectation would be if the economic environment continues to improve, you’ll see an improvement in that loan growth as we head into 2021, but we’ll continue to monitor that appropriately and cautiously.

That’s clear, thanks. Then when we think about the expense side, comp clearly had a big benefit here this quarter. Is the best way to look at that year to date? I know the fourth quarter is an important one for when you guys true up the pool and consider competitive dynamics and the like, but any additional color you can provide there? When we think about comp ratio, should we think about it net of provision or gross? You referred--I think, Stephen, you referred to it net of provision in your prepared remarks, but in prior times it was referred to as gross, so just wanted to try to square that a bit. Thank you.

Brennan, at a high level, and Stephen made comments on this too, but at a high level as we develop different businesses, and Stephen pointed to this, we’re developing businesses that have a different component of people cost than some of our businesses had had historically. When we set a comp ratio, we are always thinking based on the information we have at the time what do we think is necessary to pay our people competitively and protect our franchise. PCLs are a cost of doing business. It’s a reflection of the capital that’s embedded in the businesses, and it obviously affects that judgement. In a year where there were very, very low PCLs, the difference between those two ratios is very little. In a year where there are very significant PCLs, given the nature of the time we’re on in the cycle, obviously there’s a big difference and that will weigh more heavily in those years. But we continue to see real operating leverage in our business as we execute on our strategy, as things continue to digitize and we continue to automate, but in addition we have excellent people in a number of businesses that need to be paid when people perform, and we’ll stay very, very focused on making sure that we’re competitively and well positioned, but you’re seeing some of the operating leverage come through on the business.

Brennan, I would just point out that through three quarters, when you look at comp as a percentage of revenue net of provisions, we are spot on to where we were last year, and so there’s obviously no change in philosophy. I think David gave you all the reasons why it’s important that we take stock of provisions in the context of looking at that. I would say, though, more generally it’s important to focus on the efficiency ratio of the firm over an extended period of time, because as I said earlier, comp will be inevitably but one component of a set of operating expenses by which the firm is carrying itself, so I think efficiency ratio will be a better indicator of the firm’s ability to manage. But that’s not to ignore the focus and the view into comp as an expense, and so I think part of what David and I have told you gives you a sense of how we’re looking at it relative to provisions and where it sits on a year-to-date basis.

Your next question is from the line of Devin Ryan with JMP Securities. Please go ahead.

Great, good morning. Thanks for taking the questions. First question, just want to touch on the stock for a moment. Looking at the stock, the price is down $20 year to date, book value is up about $10, you’ve put one MDB behind you, you had a record EPS quarter today. Just want to think a little bit about you guys talk about the stock price internally. You essentially have laid out a transparent plan for the business, you’ve set long term initiatives that imply a business shift towards higher multiple areas, so I’m just curious if the mentality is that as you execute on the plan over time, the price will just take care of itself, or are we maybe getting to a point where it makes sense to take more of a stand around stock, just given that it has implications for how you run the business.

Well you know, Devin, I think you’ve laid this out very well. We’ve put out a plan, we believe we’re executing. We’ve got a lot more work to do. If we execute, I assume the stock will follow, and we’re focused on shareholder value. We’re focused on the medium to longer term, and I feel good--we feel good as a leadership team as to how we’re progressing. But there’s more work to do and our assumption is if we continue to deliver consistently over the medium and longer term, shareholders will benefit and the stock price will perform.

Okay, thanks David. Just a follow-up here on the consumer business. There was several changes to leadership in consumer and wealth during the quarter. I’m just curious if that implies any focus in shift in the business, or just any color around implications there to strategy or how the business is run.

There’s no focus in strategy or how the business should be run. One of the things that I believe very strongly and that we’ve been driving toward as a management team since we took over as a management team two years ago was getting the way we talk about the business to be set up in a way where we could transparently talk about our different big business platforms, and to have those businesses aligned with the way we were running the business internally. That is not something that traditionally we had. We had external segments, we had different divisions internally. We made segment shifts at the end of last year to set up the platforms the way we expected to run them, and the announcements we made now get people who are driving the strategy and moving those platforms forward aligned with the way we talk about the businesses to you, to the investing community, to our shareholders, and we feel that’s an important step forward. So there’s no change, but rather just a continuation of the journey we’ve been on to get the firm aligned up and set up now with these four big platforms that we really think we can drive growth over time.

Devin, the only thing I would add, just to touch on the specifics of performance within the consumer business, so overall the Marcus unsecured loans closed the quarter at a lower balance than where it began the year, and Apple Card balances were higher than where we ended the year. Both of those were very purposeful in the context of managing through a young portfolio in an uncertain moment with respect to the consumer. I would also say that the loss behavior, if you will, or the credit behavior of that portfolio is outperforming our modeled expectations; that is, losses have been coming down relative to that which was otherwise budgeted or forecasted, which is as much a function of how we’ve managed underwriting on the entry, how we’ve managed customers under customer assistance plans and the like, so that just gives you a sense of where performance lies in the context of David’s comments.

Your next question is from the line of Mike Mayo with Wells Fargo Securities. Please go ahead.

Hi. I think my question is rooted in my business school class, when I read In Search of Excellence, and it said stick to your knitting. I’m not sure if you recall that old book, and maybe it’s just too ancient, but when I look at your business, the capital market side - I mean, you’re clearly gaining wallet share. It reminds of 2009 when you were successful in supporting your customers through the last recession. On the other hand, the expansion businesses - you know, buying into credit cards, one concern I hear is you’re just buying into a lower PE activity. You certainly seem committed on that strategy, but it seems like there’s still questions there. Specific questions on the side where there’s a lot more confidence, the legacy businesses of capital markets, your M&A backlog, how does that compare to the all-time high, and trading, by how much has the wallet share gain been to the environment because VIX is so high, versus new business, so that’s on the positive side? And on the less confident side, the growth, what do you bring when you buy a credit card that the seller wasn’t providing before? Thanks.

There was a lot there, Mike, and so if I--I appreciate all the questions, if I don’t get them all. I just want to highlight, I don’t remember the book because I didn’t go to business school. But as I try to pick through and answer, first on M&A backlog, I think Stephen said this, while M&A backlog strengthened during the quarter, it’s not back to where it was at the beginning of the year, and it’s certainly not at its all-time high. With respect to market share gains, in global markets I think the market share gains, we believe as a management team that the market share gains are rooted in an evolution back of our strategy to really being very, very client centric, our One GS approach, and really trying to think about how we as an organization deliver for our clients in a very central way. This is core to the way we’re running the whole firm. It’s been a big initiative over the last two years, and we think it’s having a real impact on the way our clients interact with us and our ability to serve our clients, and we think that’s helping our market share. Certainly the volume levels, I think at this moment in time, are elevated, the overall activity levels are elevated to some degree based on the pandemic and the volatility in markets. But I think the market share is coming from the way we’re executing a strategy, and we began that focus well before COVID. We began that focus two years ago, and I think we’re really getting results from that investment. The third thing with respect to the credit card business, it’s hard to imagine we’re in any business that has a lower PE than the current PE that we trade at, but when you look at our vision for what we’re trying to do in building a digital consumer platform that marries our strong expertise in wealth while also providing a digital experience for general banking services for consumers, we’re committed to it, we believe in it, but we want to be perfectly clear - this is something that’s going to be built over a long period of time, just like we announced today with an extraordinary franchise where we have over $2 trillion of assets under supervision. That’s been built over a very long period of time, and we believe it’s really accreted to the value of Goldman Sachs and our shareholders over a very long period of time. We’re going to continue to work at this cautiously. I know there’s skepticism out there. We’re going to prove over time as to why we think it’s right, and we’ll continue to advance it.

I’m going to ask you a question that’s not really your responsibility, but it goes back to an earlier question. On a day like today and last quarter, the market seems to be giving you a PE of one or even less one-year earnings. I think there’s a disconnect between the lumpiness of your capital markets revenues with the annuity-like nature of your customer relationships, so I’m not sure if there’s any way that you could put in context the recurring nature of the bulk of the capital markets activity, even while parts are lumpy. I think some shareholders are very frustrated, as was reflected by the earlier question. I know your view is, look, stock prices follow earnings. You’ve had a focus on growing book value. Let’s grow book value and everything else will take care of itself. Is that still the way you think about that?

Well, I think your last statement is true, but I’ll make a couple of other comments at a high level and it would offer a perspective. I know, Mike, you’d have a perspective on this too. For sure we’re going to continue to focus on performing, and I think over time it will take care of itself. At a high level, the banking sector and financials broadly are well out of favor, so it’s not as though we’re sitting in a unique position. If you look at the people that you would benchmark us against and you look at how they trade on a relative basis, people are pretty clustered in the neighborhood. Is that something that I think is permanent? No, I don’t think it’s permanent. Can you and I both speculate as to reasons why people feel that way at this point in the cycle, and with some of the uncertainty? Absolutely. I do think, to your point, the client franchise and the capital markets revenues that we have are, if you’re looking at it not quarter to quarter but over periods of time as a franchise business, there is volatility in it compared to some businesses, but over any meaningful period of time, they generate lots of revenues, lots of earnings very consistently, so part of it depends on the frame through which you look. We can certainly go back over long periods of time and see how the client franchise and the strength of the client franchise continues to do well. We really believe when we focus on clients, that revenue will be sustained in the context of the market opportunity. As a business, we operate in a business that might have more short term volatility than some other businesses that are out there, that people benchmark in some way. I think it’s an interesting time because of the pandemic and the uncertainty, so I think that hurts the overall neighborhood; but I continue to believe that we have big platforms, we have scale, we have leadership positions, those things are sticky. The things that we do are not going to go away, and if we focus on our clients and delivering for shareholders over time, I believe the stock price will follow.

You know, Mike, an interesting development, just to amplify on David’s comment, which is that even in the trading businesses, which one could argue are volatile in the context of the market, on certain of the electronic platforms that we’re seeing, and I would speak specifically about the credit platform, we are seeing an increasing number of our clients come to those platforms, transact on those platforms. Now, that may be a function of work-from-home and the disposition of those clients, but we’re seeing a growing presence. Their attachment to those platforms, whether it’s marquee or otherwise, is sticky and tends to stay there, perhaps even more than what you might see in a high touch versus low touch. Getting into that in a business that you would not otherwise expect to be as predictable, if you will, I think is just something to take note in the context of your question.

Your next question is from the line of Brian Kleinhanzl with KBW. Please go ahead.

Great, thanks. A quick question on the CET1 ratio. I noticed there was a meaningful reduction in the RWAs quarter on quarter, and I heard you talk about some of the environment, just being probably seasonality, impacting that. But can you kind of tease out the change in the RWA between what was more seasonality activity versus where you actively managed those RWAs lower to ensure you got over your SCB minimums?

Yes, so I think on one hand, if you look on a year-over-year basis, it’s a question of volatility, so we’d see it higher than not by virtue of volatility; otherwise, on a quarter on quarter basis, you see the positional set change, reduce exposure, certain diversification effect which plays to the positive, so there was no meaningful uptick in risk in the context of where RWA deployment otherwise was.

Okay, and then when you think about the CET1 ratio target that you’re running to, obviously that assumes the SCB would improve for you from here. What are some of the actions that you’re taking to get the SCB lower so that you can run at a 13% to 13.5% with the management buffer over the near term?

Sure. Well, I think over the medium term, I think if you look at the various initiatives that we articulated at investor day and are executing on now, whether it is transaction banking, the consumer business, what we’re doing with respect to our alts business, all of those will reduce the stress loss intensity of our business overall. Transaction banking will be a fee generating proposition. The alternatives business equally will give us a more durable thread of fees, and at the same time take down the capital and balance sheet intensity that otherwise weighs on the capital calculation. I think all of those are geared with an eye toward reducing down, as I said, stress loss intensity and ultimately leading to a lower SCB itself.

Your next question is from the line of Jim Mitchell with Seaport Global. Please go ahead.

Hey, good morning. I appreciate the commentary around M&A and maybe the spillover impact on acquisition advance, but if think about what’s been going on this year in terms of significant capital raising, both equity, DCM, how do we think about that going forward? It sounds like you’ve replenished some of the coffer in terms of the pipeline. How much demand is there to shore up balance sheets and for capital markets activity, or is it a yin and yang where M&A picks up and capital raising comes down, and we don’t really grow banking much? Just trying to think through that level of activity.

Jim, I think it’s a hard thing. I think it’s a hard thing to look at and predict with granularity. There’s no question that the environment pulled forward--both pulled forward some financing for companies and also created a whole bunch of financings that, if we didn’t have this environment, it wouldn’t have happened. There’s no question that financing levels have been elevated during this year. At the same point in time, if again--and this goes back to my point as people think about this, if we get out of the mode of kind of thinking quarter to quarter to quarter, and we look at these as huge franchises where we have leading share and we’re well positioned, I believe over any period of time - three years, five years, seven years, 10 year - there’s going to be enormous corporate financing activity and we will have leading share in participating in that, and that will be a big profitable business that will enhance our franchise and help drive earnings growth and book value growth. So in the short term, it’s hard for me to speculate. I mean, I would speculate that if things normalize, which I expect them to, we will not see the same velocity of financing in 2021 that we saw in 2020 as people tried to adapt and finance themselves out to create more runway, given the uncertainty in the environment. Again, big franchise, big opportunity, and whatever the market puts forward, I think we’re well positioned to serve our clients and capture it.

Maybe as a follow-up on that, maybe you could update us on your efforts to expand market share. You’ve talked about going down market into the middle market. How has the progress been on that?

I appreciate that question, Jim. The progress is going quite well, and I think one of the things that I know is self evident to everybody on the call, as market cap grows, there are more and more companies that grow into being worth $500 million, a billion, $2 billion that have never been on our radar screen, so that footprint has expanded meaningfully and there’s been hundreds of millions of dollars of revenue accretion based on the opportunity set that’s come from that, and I think that will continue. I feel good about the way that platform expansion is going, and I think there continues to be more opportunity for us over time to continue to add to that footprint.

You have a follow-up question from the line of Mike Mayo with Wells Fargo Securities. Please go ahead.

Hi. What is your appetite for asset management acquisitions, and along with that, I know you’ve mentioned ROE and ROTCE, you’ve always been very cognizant of having a lot of goodwill, and you don’t have so much. So what’s your appetite for asset management deals and what’s your appetite for goodwill, and do you still have the same focus on ROE as much as ever?

I think, Mike, that I’m not going to say anything in response to this that’s different to what I said just a few minutes ago. We are making investments to grow our business, our asset management business organically. Certainly the strategy we’ve laid out in alternatives and the mix shift and the way we’re approaching that is an organic effort. We certainly are aware of the continued consolidation that’s going on in the asset management industry. We feel very well positioned as a very, very large global, broad and deep active asset manager. As opportunities come up, we’ll consider them if we think they can enhance our franchise and allow us to expand the strength of our franchise and our ability to serve our institutional clients, and also individual clients through our wealth business. To the degree that we thought something would really enhance our ability to drive that platform, we would take on the goodwill that was necessary to do it. We’re not afraid of that. We haven’t seen the right opportunity for us at the moment, and so we’ll continue to grow the business organically. If the right thing came along inorganically, we’d take a very hard look at it.

Okay, since there are no more questions in the queue, I’d like to take a moment to thank everyone for joining the call. On behalf of our senior management team, we look forward to speaking with many of you in the coming weeks and months. If additional questions arise in the meantime, please don’t hesitate to reach out to Heather; otherwise, please stay safe and we look forward to speaking with you on our fourth quarter call in January.

Ladies and gentlemen, this does conclude the Goldman Sachs third quarter 2020 earnings conference call. Thank you for your participation. You may now disconnect.