Q4 2019 Earnings Call
I would like to welcome everyone to the Goldman Sachs fourth quarter 2019, <unk> earnings Conference call.
This call is being recorded today January 15th 2020. Thank you Ms. matter you may begin your conference.
Good morning. This is how their Kennedy minor head of Investor Relations at Goldman Sachs. Welcome to our fourth 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 Dot G.S. Dot com no information on forward looking statements and non-GAAP .
Jurors appear on the earnings release and presentation. It's Audiocast is copyrighted material at 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 Sure. David will start with brief highlights on our financial results give an update on the broader operating environment, including developments related to what MDB and provide context for upcoming Investor day.
Stephen will then discuss the reason enhancements we've made to our segment financial presentation and cover fourth quarter and full year 2019 results in detail they'll be happy to take your questions. After that I'll now pass the call over to David David.
Together and thanks, everyone for joining us this morning, I'm happy to be here with you.
Let me begin on page one.
Fourth quarter net revenues were $10 billion up 23% versus a year ago.
Marking our highest fourth quarter since 2007.
Net earnings were $1.9 billion, resulting in earnings per share of $4.69.
Our or we have 8.7%.
I would note that we took a 1.1 billion dollar litigation charge during the quarter.
Which burdened <unk> and our we buy $2.95 and 5.3% respectively.
Overall, our business performed well and against an improved market environment relative to the challenging backdrop experienced a year ago.
For the 2019 full year, we generated Firmwide net revenues of 36.5 billion.
Really matching last year, which was our highest year in eight years, we reported a return on equity of 10% and a return on tangible equity of 10.6%.
Mitigation impact or are we Anoro T was approximately 150 basis points for the year.
We have a number of accomplishments in 2019.
Our income, but businesses across the firm performed well and our new business initiatives progressed as planned as we navigated a dynamic operating environment over the course of the year.
On the revenue side, our global markets business produced stronger results in an environment that improved over the year driven by strong leadership and a clear focus on client service.
We generated solid growth in FICC.
Driven by strength across our franchise, including rates commodities and mortgages.
Grew from white assets under supervision to record levels.
We also delivered strong equity investment performance, which is an important precursor to our alternatives platform expansion plans.
In investment banking, our performance was solid in the context of lower industry deal volumes.
We held a commanding lead in or M&A business maintained our number one position in equity underwriting.
Well, our operating expenses grew as a function of litigation and investments in our businesses.
We actively controlled our cost across both compensation and noncompensation, providing capacity to fund our gross.
From this position of strength, we achieved important milestones in 2019 across our key growth opportunities.
We continue to institutionalize, our one Goldman Sachs operating philosophy, keeping clients at the center of everything we do.
We launched the firm's first ever credit card platform in partnership with Apple and generated over 850 million a net revenues across our broader consumer banking business.
We completed the initial build up our digital transaction banking platform and processed over two trillion dollars of payments on behalf of the from our platform rollout. The third party clients remains planned for the first half of this year.
We acquired United Capital Bolstering our capabilities to provide a full spectrum of wealth management services to individuals.
We realigned our investing businesses into one cohesive unit to support our alternatives gross platform.
We enhance the effectiveness and efficiency of affirmed by integrating major portions of our operations and engineering teams into our businesses and we strengthened our engineering capabilities with strategic hires of a new Chief Technology Officer Co Chief Information Officer and added talent across the firm.
Importantly, we made significant investments to expand our client franchise.
Grow and diversify our revenues and operate more efficiently.
Including these investments our overall performance was solid even though our investments reduced our returns in 2019, we are confident that they are improving the long term profitability of Goldman Sachs.
Turning to the operating environment on page two.
The fourth quarter, we had solid engagement with our institutional clients and strong growth with our individual clients notwithstanding corporate client sentiment remained more measured.
During the quarter, we saw steadily rising asset prices improvement in the secured funding markets is the federal reserve took steps to bring stability throughout the quarter and particularly over yearend. We also saw progress toward Brexit resolution following the UK general election, and improvements in the U.S., China trade tensions including the.
Phase one agreement.
These conditions contributed to a supportive market, making backdrop relative to a year ago looking forward. Our economists continue to expect global GDP growth in excess of 3% over the next two years.
In the U.S. the fourth quarter provided a backdrop of solid gross evidenced by steeping yield curve and continued strong consumer sentiment.
Conditions remain supported by the federal reserves three mid cycle rate cuts in 2019.
Going forward, we expect U.S. growth to continue to run at about 2% given robust labor markets low inflation and strong wage growth.
In Europe growth continues to remain relatively low given manufacturing weakness. However in China trade headwinds appeared to have moderated with both monetary and fiscal stimulus supporting growth estimates of nearly 6%.
While we continue to monitor economic data and emerging geopolitical risks, including escalating U.S., Iran. Tensions based on what we see today, we remain optimistic that the current constructive environment for economic growth can continue.
Next I would like to take a moment to discuss the situation with one M.D.
As we mentioned last quarter, we are an ongoing discussions relating to a potential settlement of issues related to one MDB with relevant authorities across multiple jurisdictions, including most notably the U.S. and Malaysia.
Given the nature. These negotiations we determine the need to take a litigation charge in the fourth quarter.
I noted earlier, our legal provision in the quarter was 1.1 billion with a preponderance related to one M.B.B.
Well there can be no assurance of reaching a settlement.
For the timing if we do our conversations with authorities are progressing remain active.
We're working hard to bring to close to bring closure to this matter as quickly as possible.
As I've said in the past we do not believe this battery is representative of our longstanding values.
Over the past several years, we've taken the time to be self critical and reflective to ensure that our culture of integrity collaboration and escalation only improves from this experience. These efforts will continue.
Lastly, before passing it over to Steven I would like to briefly address our upcoming Investor day, which will be held on Wednesday January 29.
Through a series of presentations from John Stephen in May and to our business in control side leadership, we hope to provide our stakeholders additional insight into the from strategic direction.
We will provide a detailed review of our strategic priorities by business, including new products and services that we have highlighted to you previously.
We will also provide financial targets and goals by which our progress can be measured we hope you'll join us for the day either in person or via webcast with that I will turn it over to Steven.
Thank you David let's turn to page three before reviewing our financial results I'd like to spend a moment discussing our new financial disclosure on January 7th we announced a realignment of our segments, which form the basis of earnings presentation. Today. We now report the following four businesses investment banking global markets.
Asset management and consumer in wealth management.
We believe our revised financial reporting reflects our ongoing commitment to transparency the segments more closely aligned to how we now manage the firm with clear lines of management responsibility and leadership over each segment.
Segments Importantly, also reflect how we serve our key clients, including corporations governments institutions and individuals and lastly, the segments provide for greater accountability in the execution of our forward strategy as or initiatives are executed and reported.
Importantly, I would note the key structural change to eliminate the investing in lending segment is consistent with our business strategy and will allow you to track our lending and financing activities alongside the relevant businesses as well as to allow our progress in a more transparent way.
Also of note and consistent with our broad commitment to transparency, we elected not to create a corporate segment. This is a different approach than many of our peers, who retained costs for capital at the corporate level.
We believe our process of allocating all firm wide cost and capital is a prudent management tool and a more comprehensive way of evaluating the true performance of our businesses.
Next let me itemize several of the more significant elements of our segment changes, which we listed in our recent 8-K filing.
As I mentioned, the most significant change was the elimination of investing in lending now the results of our lending in financing activities are included within each of the four segments. For example, corporate lending activity is included in our investment banking segment. This encompasses relationship lending transaction related financing and.
Broader lending to our corporate clients.
Secured or collateralized financing activity on behalf of institutional clients of our securities business is now reflected in FICC in equities financing within our global market segment.
Lending related to our alternatives investing businesses, including investments in debt Securities and real estate credit is reflected in the asset management segment.
And lending to our individual clients across all wealth bands using the consumer and wealth management segment.
Additionally, we now report the firms on balance sheet equity credit and real estate investing activities.
Asset management segment. This segment houses, both GSM and our merchant banking activities for asset management clients supporting our third party alternatives business expansion.
Consolidating our on balance sheet and third party asset management investing activities is consistent with our forward strategy to that end. This segment includes management and incentive fees associated with asset management clients across the full spectrum of asset classes from cash to alternatives and will also.
Through the impact quarterly valuation changes to balance sheet positions held in public and private equity investments.
Another significant change is additional disclosure in our new consumer and wealth management segment.
Including wealth management fees incentive fees private banking and lending revenues as well as consumer banking revenues. This segment houses our longstanding private wealth business as well as our newer consumer offerings.
Broadly speaking and as I noted earlier, the new segments align with the client orientation of the from investment banking global markets and asset management encompass the firm's engagement with corporates governments and institutions and consumer in wealth management includes our engagement with individuals.
With that as background, let me review the financial results of the firm on the basis of our new segments.
Starting on page four investment banking produced fourth quarter net revenues of $2.1 billion up 12% versus the third quarter, but down 6% versus a robust fourth quarter last year.
For the full year investment banking net revenues were $7.6 billion, our second highest ever down 7% from a record 2018, reflecting lower industry deal volumes.
Fourth quarter financial advisory revenues of $855 million were up 23% sequentially, but down 29% versus last year consistent with lower industry volumes.
In 2019, we participated in 1.4 trillion dollars of announced transactions and closed 375 deals for nearly 1.3 trillion of deal volume contributing to our number one M&A League table rankings.
Looking forward conditions for continued M&A activity remains solid client dialogues are healthy financing markets are open and we are seeing active interest across a variety of sectors. We also continue to see strength in our backlog coming into the new year, notwithstanding solid revenue bookings from deal closings in the.
Fourth quarter.
Moving to underwriting equity underwriting net revenues of $378 million were up 3% versus the third quarter and up 23% versus last year.
For the year, we ranked number one globally and equity underwriting supported by $68 billion of deal volume across more than 375 transactions.
During the quarter, where we saw particular strengths in our U.S. and European equity businesses. We participated in leadership roles on several of the largest public offerings.
Turning to debt underwriting net revenues were $599 million up 14% versus the third quarter and up 37% from a year ago, reflecting higher asset backed and leverage finance activity.
Our franchise remains well positioned as evidenced by a number too high yield league table ranking.
Revenues from corporate lending were $232 million. These revenues relate to a net $28 billion funded portfolio of corporate loans now held in investment banking as well as our portfolio of corporate lending commitments as background. There are three components store corporate lending portfolio relation.
Chip lending to our corporate clients credit extensions for strategic activity, including acquisition financing and lending to our broadening footprint of corporate clients, where we target attractive returns.
Looking forward, giving given our active level of strategic dialogue or expanding client footprint and strong corporate relationships. We remain optimistic about the continued level of commercial engagement by our corporate clients aided by the current backdrop of well functioning and constructive capital markets.
Moving to global markets on page five.
Net revenues were $3.5 billion in the fourth quarter up 33% versus last year, our growth was driven by a better market backdrop in FICC versus the end of last year and strong performance in our equities businesses.
For the full year global markets generated $14.8 billion of net revenues up 2% versus 2018, driven by stronger FICC and higher equity financing performance.
In the fourth quarter FICC net revenues were $1.8 billion up 5% sequentially and up 63% year over year.
Our growth versus last year was driven by higher FICC intermediation revenues, where we saw better performance as well as higher FICC financing revenues, notably in repo.
Four out of five of our FICC market, making businesses posted higher fourth quarter net revenues versus the prior year, reflecting the continued strength of our client centric model and improve diversification of our business mix.
Our rates franchise in the U.S. performed particularly well as we executed on behalf of our clients and navigated the broader market environment effectively.
In commodities are business performed well across the board driven by significantly stronger performance in oil natural gas and power and investor products.
In mortgages net revenues rose aided by strong client activity and performance in agency securities in currencies net revenues improved versus last year amid a better geopolitical backdrop, despite lower volatility we saw strong performance and activity around the general election in the UK.
And saw healthy corporate deal contingent hedging activity in the quarter.
Lastly in credit we saw a better investment grade performance in the us in EMEA offset by lower client activity.
As we've discussed previously we're working to further improve wallet share with each of our clients across both risk intermediation and financing while investing to expand our capabilities to automate workflows serve clients electronically and deliver structured solutions inefficient formats.
Turning to equities on page six.
Net revenues for the fourth quarter were $1.7 billion down 8% versus the third quarter, but up 12% versus a year ago.
Equities intermediation net revenues of $979 million rose, 9% versus a year ago on stronger cash revenues in the U.S. in Asia and strong performance in low touch and block trading partially offset by lower derivatives activity.
Equities financing revenues of $732 million were up 17% year over year, reflecting improved spreads and higher client balances financing activity remains a strategic priority for the business given it has historically exhibited attractive returns and considerable adjacent benefits to our broader.
Equities franchise, particularly for our growing systematic client base.
Moving to asset management on page seven.
Collectively our asset management activities produced net revenues of $3 billion in the fourth quarter up 52% versus last year, driven by stronger equity investment performance for the full year asset management generated net revenues of $9 billion inline with a strong 2018 as growth.
An equity investment revenues offset lower incentive fees.
Fourth quarter management, and other fees related to client assets under supervision totaled $666 million up 6% versus a year ago offset by lower incentive fees across the asset management segment, we manage a U.S. totaling 1.3 trillion dollars at year end and will cover for.
And white aways trends in a few moments.
Next our equity investments generated record quarterly net revenues in the fourth quarter of $1.9 billion up significantly versus last year, driven by gains on our public and private investments.
Approximately 90% of the gains were event driven including sales or marks on public securities as we took advantage of harvesting opportunities.
The fourth quarter showed material improvement relative to the third quarter, where we experienced headwinds on certain large equity positions, including of on tour trade web we work and Hoover.
During the fourth quarter those positions taken together rebounded and for the full year produce gains of approximately $400 million in the quarter. We also exited our position in October and reduced our position in trade web or public portfolio was $2.4 billion at year end where appropriate.
We will continue to reduce the size of certain positions in the public portfolio.
Net revenues from lending activities in asset management were $427 million and primarily relate to loans backed by commercial and residential real estate lending revenues include net interest income and mark to market gains on debt investments.
On page eight turning to consumer and wealth management, we produced $1.4 billion of revenues in the fourth quarter up 8% versus a year ago that driven by our leading ultra high net worth business.
Echo and our newly acquired United Capital High net worth business and our consumer banking businesses.
For the full year consumer in wealth management generated net revenues of $5.2 billion essentially unchanged versus a year ago as strong consumer banking growth and higher management and other fees offset lower incentive fees.
For the quarter wealth management net revenues included record management and other fees of $967 million up 17% versus last year, reflecting organic growth and the United capital acquisition.
Assets under supervision rose to $561 billion at year end.
We also saw lower incentive fees, while private banking and lending revenues were relatively stable.
Consumer banking revenues were $228 million in the fourth quarter up more than 20% versus last year, reflecting higher net interest income from strong growth in deposits and higher loan balances.
Consumer deposits at year end totaled $60 billion across the us and UK up nearly 70% versus last year.
Funded consumer loan balances totaled approximately $7 billion of which $5 billion were from markets consumer loans and 2 billion from credit card lending.
The slowing pace of growth in our markets unsecured loan business reflected the anticipated growth in our credit card lending from the launch of Applecart.
While still early in while still in early stages of growth our consumer business generated a total of $864 million in revenues for the from this year from a standing start just three years ago.
Now, let's turn to page nine for our firm wide assets under supervision.
Total client assets for which we are in a management fee, including those in asset management and consumer in wealth management totaled a record 1.9 trillion dollars in the fourth quarter up 97 billion versus the third quarter and 317 billion versus a year ago, our 2019 growth was.
Driven by 108 billion of long term fee based net inflows from fixed income and equity, including the acquisition of United Capital $65 billion of liquidity net inflows and 144 billion of market appreciation.
Switching gears on page 10, let's address net interest income and our lending portfolio.
Total Firmwide Eni was $1.1 billion for the fourth quarter up 6% sequentially and 7% year over year driven by loan growth. This eni measure is more comprehensive than the one we previously highlighted in debt I NL and most notably now includes all Eni.
From global markets activities for the full year 2019, we reported Eni of $4.4 billion up 16% driven by deposit and loan growth in consumer and wealth management increased lending in investment banking as well as more lending activity in global markets.
Next let's review loan growth and credit performance. Our total loan portfolio was approximately $109 billion up approximately $4 billion sequentially and up $11 billion versus year ago with the year over year increase encompassing corporate commercial real estate wealth manager.
Simon and Apple card loans.
Our provision for loan losses in the fourth quarter was $336 million up 45 million versus last quarter, driven primarily by idiosyncratic wholesale impairments and loan growth in our applecart portfolio provisions related to our markets portfolio were modestly lower quarter over quarter.
Our firm wide net charge off ratio increased by 20 basis points sequentially to approximately 70 basis points in the fourth quarter.
Our losses remain in line with our expectations given the current point in the cycle, we continue to monitor the portfolio and broader risk factors and believe our credit exposure remains appropriately sized.
We also take note that in 2020, we will experience a full year of loan loss provisioning related to growth in the Apple card portfolio.
This growth in provisions will occur under the new Cecil accounting standard, which requires reserves for the expected life of loan.
Importantly, the reserve build for growing credit card portfolio does not reflect actual economic losses.
Incremental reserve build will depend on loan growth, but given our expectations for card growth. We expect our 2020 total firm wide loan loss provision to be higher than in 2019.
With regard to Cecil adoption based on our loan portfolio as of yearend 2019, we expect to record a day, one increase to our reserves of approximately $825 million in the first quarter, which will not impact our income statement or EPS. This will result in a onetime.
After tax reduction to retained earnings of approximately $625 million, which for regulatory capital purposes will be phased in over the prescribe transition period.
Next let's turn to expenses on page 11.
Our total operating expenses of $7.3 billion increased $2.1 billion versus the fourth quarter of last year, reflecting higher compensation and litigation expense in the quarter as well as our continued investment for growth.
On compensation as we've said in the past our philosophy remains to pay for performance and we are committed to compensating top talent, our full year compensation ratio, 33.8% is roughly flat versus 2018, and our compensation expenses were flat year over year over the.
Course of 2019, we reduced compensation expenses across many of our businesses to improve operating efficiency and to support incremental compensation expenses related to our growth initiatives, where revenue production is beginning to materialize.
As we've said in the past longer term, we view the compensation ratio metric as less relevant to the firm as we build new scale platform businesses.
On non compensation expense, our cost for the full year 2019 rose 13% versus last year.
Litigation expenses and investment spend contributing to that growth.
Specifically litigation expenses accounted for 300 basis points of the percentage increase while investments in technology, and new businesses, including specifically Marcus Applecart transaction banking and United Capital added another 300 basis points, we also incurred additional expenses.
From our consolidated investments for the full year, the total pretax impact of our organic business projects, including Marcus Applecart and transaction banking is approximately $700 million, resulting in a drag of roughly 70 basis points on our ROI.
At Investor Day, we will talk more about our plans for these businesses to scale over the coming years, and how we expect them to be accretive to our returns.
For the full year, our efficiency ratio was 68%, which includes a 340 basis point impact from litigation expense.
Finally on taxes are reported tax rate was 17% for the fourth quarter and 20% for the year.
Our tax rate this quarter reflected the impact of updated guidance from the U.S Treasury regarding the beat tax and incorporates an adjustment to prior quarterly accruals relating to this guidance.
Given this updated guidance, we expect our tax rate over the next few years to be approximately 21%.
Turning to select balance sheet data on slide 12, let's begin with capital our common equity tier one ratio was 13.3% using the standardized approach down 30 basis points sequentially driven by lower shareholders' equity.
Our ratio under the advanced approached increased by 30 basis points to 13.7% due to enhancements in loss given default severity modeling that were favorable to the ratio.
Our SLR of 6.2% was flat sequentially.
During the full year 2019, we returned a total of $6.9 billion of capital to common shareholders through both share repurchases and common stock dividends.
Our basic share count ended the quarter at another record low 362 million shares down over 30% from our peak in 2010.
Our book value per share was $219 up 5% versus a year ago.
As you will recall our share repurchase authorization for the 2020 CCAR cycle beginning in the third quarter of 2019 was $7 billion or $1.75 billion a quarter.
In the third quarter, we repurchased only $673 million carrying forward the unused authorization.
In the fourth quarter, we repurchased $2.2 billion utilizing approximately $400 million of the prior quarters Unutilized capacity.
Going forward, we carry a repurchase authorization of approximately $4.2 billion over the next six months.
As we make capital return decisions, we will continue to balance our priorities prudent capital management and the return of capital in excess of what is needed for investment that is shareholder accretive as such the magnitude of our forward repurchases will as always depend on our earnings capital levels and competing investment.
Opportunities.
Now turning to the balance sheet.
Total assets ended the year at $993 billion, essentially unchanged versus the third quarter and up 7% versus last year, driven by higher client activity and areas of growth across the firm.
On the liability side, our total deposits increased to $190 billion up $32 billion versus last year were while our total unsecured long term borrowings were $207 billion down $17 billion over the same period.
Over the full year, we refinanced approximately $20 billion of parent vanilla debt maturities with approximately $5 billion of issuance relying more significantly on our growth in retail and other deposits as we continue to diversify our funding sources this trend toward deposit growth and ridden.
Action in unsecured long term borrowings should continue.
Before taking questions I would like to spend a moment to discuss the $5 billion organic growth initiative announced in 2017.
That initiative comprised a number of important efforts on which we continue to execute including client expansion in investment banking wallet share growth in global markets consumer loan and deposit growth lending and financing deployment and asset management growth.
As we go forward, we will continue to execute on these initiatives, but our focus and communication will instead reflect more ambitious firmwide performance targets to being introduced on Investor day.
We will not be focused on revenue targets, but rather on returns and efficiency consistent with our broader long term strategic plans to drive shareholder value. These targets will also reflect growth opportunities that were not included in the original $5 billion, such as transaction banking and credit card.
So we look forward to discussing our new targets in detail at the end of the month.
In conclusion, our fourth quarter was strong leading to full year performance that was inline with the evolving macro environment and reflective of our continued investment in new businesses.
We aim to operate more efficiently and drive higher returns in the future and look forward to sharing our medium and long term objectives at Investor day in approximately two weeks time with that thanks again for dialing in and we'll now open the line for questions.
Ladies and gentlemen, we will now take a moment to compiled acuity roster.
If you like to ask the question. During this time simply press Star and then the number one.
Hi.
Your first question is from a line of Glenn Schorr with Evercore. Please go ahead.
Okay.
Hi, Thanks very much.
No what to expect on this one so so doing more lending across the franchise and it clearly is working and you've now breakout for us intimidation versus financing.
In trading or end markets and I think this opportunity do more their semi appears to a lot more on the financing side.
So the small question is are we going to see more at Investor day in terms of.
Metrics that.
We can help.
Model and build and evaluate performance on.
And and Thats question, one on that question too on that is.
Ken how quickly can you expect those two a grow and be enhanced returns over the next.
Two.
Sure. Thanks, Glenn it's Steven ill take a I'll take your question I.
I guess on the small question you asked which is should you expect.
More disclosure in the frequency of it.
I think the answer is ultimately, yes, as it relates to lending broadly around the firm.
There are a number of categories of lending that will over time become more material and as they become more material, we will both by obligation, but equally by interest look to provide.
Incremental more information on net lending I would say consumer is a good example of that as between unsecured consumer lending and equally what we're doing on the credit card side I.
I think broadly speaking in lending I would say mindful of the cycle are clear plan is to grow financing revenues in both FICC in equities to answer your direct question and I would say the type of lending that's going on there is largely in the repo business in FICC gets in prime in equities I think.
From a credit risk point of view, we like Ken can digest and and evaluate that risk.
Notwithstanding where we sit in the cycle more broadly and I think metrics in global markets around net lending again, we'll continue to grow out less thing I'll say as it relates to Investor day.
Look we're going to lay out certain targets at the enterprise level, we will be more disclose of about individual businesses, but I think equally important investor day will be the beginning in the end of a dialogue around this so that the numbers just don't stand alone and we give you context for rate of growth and how were manner.
Judging it.
Okay I appreciate it anything there.
And then on the on the expanding the corporate client base.
Specific question I have is are you fully cut over on on processing Goldman's.
Cash management payments.
And.
Where are we in terms of dialogue with.
Signing on any clients sure. So in transaction banking as we have said from its inception, we would be the first customer and then we would look to bring on clients of the firm.
We are the first customer and I think as was mentioned during the script.
We have been processing payments on behalf of the firm across five currencies and totaling about two trillion dollars in terms of whats getting processed and so.
Thats going well and the from is obviously benefiting from that as in to the extent that we keep as a customer lower operational deposits on deposit with commercial banks in that regard we have all along been in dialogue with clients of the from first in the context of getting their sense and input.
But as to what this platform ought to look like how would we designed it.
So as to meet pain points today are experiencing that collaborative engagement has been going on and we are now engaging these clients as future customers of the firm in the context of transaction banking with certain of them already putting operational deposits on deposit with the bank and I think as we've said.
In 2020, you'll see that client roster and that participation in the business grow.
Your next questions from a line of Christian Bolu with autonomous. Please go ahead.
Good morning, David and Steven.
Firstly, thank you for the new disclosure, it's a it's very helpful.
My first question is on credit provisions.
Yes, it looks like about a third of the credit provisions are.
And the vast majority of sequential quarter, increasing provisions came from the asset management Division.
When I look at some of the Eni disclosure.
On page 10 in the second only 15% of Eni comes from asset management, So I'm not sure what mismatches day, but but but just wanted to step back here a little bit help us understand what exact kind of lending goes on the asset management division, maybe a bit more color on the credit quality, there and the overall return.
So far lived up portfolio.
Sure Thanks, Chris and for the question. So let me start with kind of the geography and the segment.
So in in our asset management business sits alternatives lending so think about that as a portion of the old debt. I'd also this is mezz and lending.
That's made on a principal basis. So what you see reflected in that line is both net interest income that is derived from those assets and equally volatility in the valuation of those debt assets themselves. So that describes the geography of it in terms of what played out.
Over the course of the year in provisioning so the delta in provisioning for the full year was $390 million about a 100 million of that was found in the consumer and wealth management business and the vast majority of that was related to provisioning.
To the growth in Applecart I should point out it was not related to any either impairments or off model. If you will provisioning related to the balance of the consumer business. It was related to the growth in applecart the balance of the 390 million call, a 300 million or so related to it.
Impairments on loans across a variety of different segments asset management being one investment banking being the other and that was around corporate wholesale credit it involved impairments across a range of different industries.
Most notably in energy some in manufacturing, none of which were material in the context of the firm and so thats the way the provisioning divided up as between impairments and loan loss provisioning for the growth largely in the Applecart portfolio.
Okay. Thank you helpful. Maybe stepping back on the on the balance sheet as a whole.
You kind of sitting close to $2 billion, which is more or less of the highest level since I've financial crisis in a way to so just help us understand just broadly speaking in what's driving growth.
And sort of the returns you will get done for deploying incremental balance sheet and then just longer term how critical is balance sheet growth to driving revenue growth and how does that sort of factor or your longer term thinking around capital return, yes. So I would say couple of things first as a general matter our balance sheet growth is itself.
Purely a function of being in the service of client demand. So we're we're guided entirely by where demand lies for client petitioning of the firm in the context of the flow of our business. So over the course of of 2019, we deployed balance sheet by example against repo.
So where there was demand for liquidity, particularly in the context of the various uncertainty that that that existed in the repo market. We grew balance sheet. So as to stand as an intermediary of liquidity for our clients. So it grows as a function of client demand I think as we think about areas.
Of balance sheet growth, we think about it purely in the context of of accretive returns for the firm. It's not a revenue driven proposition. It's really about can we deploy balance sheet on behalf of clients. So as to generate accretive returns to the firm and that's kind of the true North if you will that square.
Comp is points in terms of how our balance sheet ultimately ultimately fluctuate and candidly as the CFO I look at balance sheet much as I do liquidity or any other resource around the firm as allocating in the pursuit of accretive growth oriented opportunities and shareholder return.
And for our stakeholders.
Your next questions from the line of Michael Carrier with Bank of America. Please go ahead.
Hi, good morning, Thanks for taking the questions.
First just revenue trends are strong in the quarter. I think you mentioned corporate sentiment is still being muted, which you can take more time I'm just curious if you're seeing any improvement.
On the corporate front and on the institutional side were there any asset purchases during the quarter do that had much impact on global markets.
Sure. Thanks for the Thanks, a question Michael.
There's no question I think that the environment during the course of the year.
Improved as the year went on and while I'd say corporate sentiment is still add a little particularly given some of the macro overlays like us China.
Trade et cetera, there's no question in the fourth quarter the environment improved.
Based on the data or information, we can see across activity and dialogue with clients I would say that it's improved in the fourth quarter and the trends that were seen early.
Into.
Into 2020 are a little bit more positive.
And so those will be the usual things that we could look out across activity set with respect to your second question. There were no material asset purchases that impacted global markets.
Okay, and then just quick follow up on the efficiency ratio I'm sure you guys will get into that in two weeks.
And there was a lot of noise this quarter, but I think in the past you mentioned I think 2019 kind of being the height of investments and just want to.
At an update on does that still protein and we should start to see some improvement on on the efficiency ratio at the revenues in some of the newer areas you start to gain traction.
Sure. Thanks, Michael so on the efficiency ratio.
At Investor Day in my presentation, I will go through kind of that migration and give you the elements of it obviously it feeds both in the context of revenue and expense.
And so we'll go through that.
In terms of your question on the height of investment.
I have said Inc. and and would reiterate here that 2019 is the depth of investment when you look at investment across three of our discrete products, namely.
Marcus Apple cart and transaction banking and equally I've made that reference and again reiterate here.
Excluding the reserve calculation, which obviously spoke of in the context to the prepared remarks. So when you look at the investment X Reserve 19 for those three initiatives. You know is lower point and I think we'll start to see reduced.
Expenditures relating to that.
I would say that overall and then again this relates back a bit your efficiency question my expectation around Noncomp Ics non compensation expense ex litigation is that it would run roughly flat in 2020 relative to where we are the whole ambition of what we're doing around expense.
This is is trying to create operating leverage and efficiency. So as to continue to fund investment around the firm and Thats not investment limited to the three products that I spoke about but equally across.
Technology investment around the infrastructure of the firm and the like and so we'll start to see that play out obviously in the context of flat expenses year over year, our hope and expectation is that we'll start to see higher revenue generation from some of these investments which will play out posit.
Finally in the context of the efficiency ratio itself.
Your next question from a line of Steven Chubak with Wolfe Research. Please go ahead hi, good morning. Good morning, So I wanted to start off just a into some of the new segment disclosure as particularly the consumer and while side of the business and clearly would sit out most to us and you alluded to this earlier in the call.
Was the pre tax margin coming are running much lower somewhere close to 10%.
Clearly the new business initiatives the significant drag that that's had on the margin is quite evident I was hoping you could speak to what any during currently just in terms of the platform Buildout and new investment for that strategy, specifically and just through the cycle. How we could think about long term pre tax margin potential for that segment.
As you continue to scale and maybe begin to run a bit closer to some of the peer comps sure. So let me answer the question generally.
We have disclosed obviously.
Information around expenses and pre tax our intention at Investor day is to go to pre tax margin and returns across the whole of the business and then in the context that will provide you an investor day. Our intent is to continue to do that on quarterly earning calls like this so you should have an expectation that will.
Continue along that path.
I'd also say and I'll reflect on this year generally, but more specifically in our Investor day.
Our intent is not to leave you in the dark as to.
The consumer in wealth management segment in terms of overall margins, meaning.
We want to give you a sense of where the wealth business. It's that is the PW, one business, which obviously demonstrates a much higher margin than what the segment reveals with the segment being in effect burdened by the continued growth in investment spend in the consumer space. So we will separate that out.
My My my guidance to you in terms of expectation is that the wealth management segment or sub segment within that performs at a much more market level margin than the way in which the segment otherwise illustrates but again, we will decompose that for you with context as we move forward.
That's great to hear Stephen and just one follow up for me or as it relates to that provision appreciate the detail you provide in earlier question.
The guidance, calling for higher provision in 2020, I don't think that comes as a big surprise to anyone but just given expectations for a healthy step up in provision simply due to seasonal implementation and some loans consumer loan season, and I was hoping you can maybe just help us frame of it better what's a reasonable.
Provision level or run rate expectation, if theres no change in the macro but we simply have to reflect the impact of diesel with an assumption that you'll see relatively steady growth in consumer loans. Yeah look I think generally speaking you know our own budget is in their realm of call it $1.1 billion to $1.3 billion.
In terms of a broader budget I would say a lot of that reflects continued growth in the Apple card portfolio as well as lending more generally but again.
As you grow from a negligible level at the inception through to what we hold both in terms of roughly $1.9 billion of where we are and what that growth will be in the ensuing year, obviously that provision through 2020 will be exaggerated you'll see it that way, but thats just part of the overall.
Growth.
As an aside.
The provisioning growth related to Apple cart again more from a standing start is itself burdened by Cecil relative to where provisioning would have been so it's marginally more exaggerated in the context of the life of loan component to Cecil.
And the like now.
What I offer you by way of budget is just that it obviously will depend on the pace of loan growth broadly the pace of loan growth in Apple card, which we are going to calibrate bet based purely on risk parameters and our own judgment about the tone in nature of the market in which we're operating.
Your next question comes from the line of Betsy Graseck with Morgan Stanley . Please go ahead.
Hi, Good morning, Davidson Hi.
Hi.
It's a little bit of a philosophical question around lending and how you're thinking about your various loan books and the question is kind of coming from the perspective that I'm I'm thinking here.
You've been working with a balance sheet, that's a high velocity balance sheet.
And I'm wondering if you perceive your various loan books as.
Moving more from a velocity balance sheet towards the storage balance sheet is there anything in in there.
I'm thinking about you know do you do you hedge some of your loan books now are there some that you're going to continue to hedge some that you would not consider hedging.
Does it impact how we think about the capital on the capital allocation to loans.
Wondering if you saw that resonates at all with how you're thinking about the loan Bucks in a very short term segments.
No no no. It's a very good question.
I'd say the following first there is nothing about what we're doing in growing our.
Our loan book, particularly around consumer for example that is in effect substitution for business that will continue to do have a capital markets orientation around lending. So for example, and we look at the two consistent with trends that each market shows and kind of risk parameters.
And levers that we hold to manage risk, but given example, if you think about corporate lending. So for example lending we make by way of acquisition financing that we provide to our clients what I look at in the context of our deal book has a lot to do with size, but equally with velocity turn.
So right now our Dealbook turns that inside of three months Thats, an important metric to think about as we manage corporate lending and capital markets related lending that's going on.
That is less of a relevant consideration if you will in the context of growth in our consumer loan book or what we do around Applecart as a component of that there were quite careful to consider what we do about provisioning. How we think about the qualitative overlay to the size of our provisioning as we look at a.
Maturation of that portfolio start to look at more on premise data as it relates to our consumer portfolio as opposed to third party metrics and so we think about these two things in some sense differently in terms of what you apply by way of the rigor and metric and overlay in managing.
That risk, but equally we obviously look at the totality of lending that's going on and the rate of growth as it relates to the overall balance sheet and the from itself. So I hope that's helpful and sort of our broad philosophical approach to lending.
And does it.
Then you know come back towards capital and what kind of capital ratios you need what I'm hearing is on the consumer side or maybe more capital conservative, but obviously there is norway associated with that that should pay for it.
Whereas on the banking side, you know that velocity.
Suggests that it might not be as capital consumptive as you know commercial whole loan a different organization. Yeah. I mean, the way I'd answer that question again to sort of stick to sort of a broad view of it all from from the firm.
You know, we're driving and growing new businesses at the firm that inevitably will carry with them more durable and recurring fee revenue. They were therefore will by definition carry with it less stress loss in the context of it they will in some sense be less capital dense and then.
Where they've been and so you know we're going to evaluate risk return against the capital that's required against each individual business and render judgments there as to what those returns look like on a capital adjusted basis, where we want to deploy capital, where we don't I guess, what I'm, suggesting to you it's a much more diner.
NAMIC process than not and but overall it fits within the component of growing and building businesses that have less stress draw and therefore, the potential for lower density from a capital perspective.
Your next question is from a line of Mike Mayo with Wells Fargo. Please go ahead.
Hi.
Steve I think it's had non comp should be flat in 2020.
But in 2019, almost every noncomp category when higher so is that simply because of the slice that question what's changing.
Yes.
So Mike maybe a bit the way to answer that is let me decompose a little bit of the growth year over year in non comp expense. So.
As you know we reported a 13% increase in non comp expense about 3% was related to litigation I'm not going to im not going to sort of foreshadow where that will be but just to understand the in the component of growth 3% of the 13% was just that.
About another 3%, 3% to 4% was related to broader investment around the from whether that's tech investment consumer transaction banking and United Capital now that's going to grow, but but that segment of non comp expense is going to start to sort of graduate off as those businesses start to hit.
Hit a certain level of maturity and as I've said, we're looking to prune expenses all around the firm so as to create operating leverage and fund the continue investment expense.
That's there and then finally I would say there is there are certain elements of investment entities and other components of expense growth in non comp that equally will come off overtime. So I just draw that out what I do want to tell you is that as we get to Investor day, we're going to give you a certain it.
Expense target that we're going to look to harvest added the firm in very concrete terms that will help feed what I've been describing which is an objective of creating capacity for reinvestment in the firm overtime and so thats why when I guide you that direction as being flat it is consistent with creating that capacity there.
We'll be growth some of the growth will come off others will be funded by capacity, we create in and around the firm.
Our that's helpful. And then just one big picture question.
David as you Steven mentioned, well functioning and constructive capital markets. You said the trends in early in 2020 or more positive I guess why do you think SDK and do you think this time is different versus the past decade. You think these improvements are sustainable or not or what's your level of conviction.
In other words, we haven't heard you on the earnings call, David or Steven for a long period of time, we can't tell your relative.
Constructed this on the market so.
Just a little myeloma.
All right well I appreciate the question, Mike and I am I don't know that I can help you with my my relative I'll try to I'll try to reiterate some of the things that I said.
Hopefully it will be it will be helpful context. So.
I do think I do think the economic environment at the moment is constructive not what I said on the call about the U.S. economy, and our expectation of growth of about 2% and in 2020, we have relatively high conviction on I can give you a set of things from a macro and geopolitical.
Perspective that could change, which should significantly shot confidence and therefore change that picture, but I think the chance of that happening in 2020 at this point seems low it's not zero, but it doesn't seem likely.
I think that theres been a slight improvement and thats what I. That's what I said when I was asked earlier, we're talking about corporate center and a slight improvement corporate sentiment as we came to the ended the year and there was some progress in the year on some of the macro overhang that would have a tendency to affect corporate sentiment and so I think you have a slightly more positive corporate sentiment.
Heading into 2020, and I do see some indications around.
Around deal activity that look a little stronger in the fourth quarter and as we step into the first quarter of of this year.
So I do think its constructive I made comments with respect to sluggishness in Europe , but a little bit more constructive on China again, with a little bit of a clearing of the U.S., China is a step forward that might remove some slight headwinds.
But.
But I don't know how to give you a relative I think our general point of view isn't the distribution of outcomes. The highly most likely outcome is we have a relatively benign economic environment in 2020.
Your next question from a line of Brennan Hawken with you BS. Please go ahead.
Hi, Good morning, Thanks for taking my questions just a quick follow up on the.
Target all around the Noncomp and your expectations.
Thanks, Steven you had said that you expect to to be flat from here just to clarify is that that from here non comp for the full year of 2019 ex litigation or is that the for Q run rate ex litigation No I would say it's in the 2019 ex litigation kind of where we stand on the full year.
Perfect. Thank you very much and then I.
Another one on expenses.
Yeah.
There was a curious about comp and whether or not there might have been some noise in the comp ratio. This year. There was an elevated level of partners retiring did that have any impact on that metric here here this year or.
More or less so.
Hi.
Thanks for the question, Brad and now with respect to the comp ratio partner retirements in the movement of partners in and out of the from had no impact on the top ratio.
I would just comment because I I've seen some commentary on this.
When we look at the movement of partners through the cycle. The two year cycle of partners and we have an election coming up.
Hi, This fall there is nothing about the movement in 2019, the looks different to US then the move that we've seen over the first year over the last number of cycles. So we have moving our partnership it's part of the culture. The partnership that younger partners have brought up and despite.
Some of the dialogue around it we don't see anything significant about the movement of partners at this point in the cycle.
Your next question from a line of Jim Mitchell with Buckingham Research. Please go ahead.
Hi, Good morning, maybe we can talk a little bit about your expansion of the <unk> alternatives business and just maybe talk a little bit about.
The efforts to accelerate that growth and if there will be any kind of balance sheet usage associated with that or is it really going to be just sort of.
Gross.
So what we what we've tried to do and at the Investor Day, We'll give you more color.
On this and kind of walk you through a plan around it we've won an alternative business that has been some client capital and balance sheet capital and in the context that client capital and balance sheet capital. The business has been how is in multiple different business is spread across the firm.
We have now who are all those businesses together in one business and we are we have put together and moving forward with a plan to significantly increase the institutional client money that we manage with that infrastructure around the globe. Historically, we have managed some institutional money, but we.
Managed very significant private wealth body.
In addition to using our balance sheet.
On a go forward basis, we don't plan to grow the balance sheet, but we will continue to use balance sheet, but we will remix that balance sheet. So that the R.W.A. density is different and it's less capital intensive but the primary growth plan for the business is to over time raise a significantly increased amount of instead.
Additional capital that appreciate the fact that our consolidated alternative platform is broad global and deep and that we operate and all the all the different categories private equity growth equity credit infrastructure real estate and we also do it all over the world and have resources all of the world to execute on that.
And that is very attractive to the long in the large institutional capital razors, and we have not traditionally attached or have partnered with them across this blog platform and so at Investor Day, We'll give you more color on how we plan to do that and what you could expect from that over the coming five years.
That's really helpful is there any challenge or do you find competing with Youre.
More pure play competitors that have already traded do you think theres, some sort of disadvantaged in raising institutional money, having your hands and other businesses.
Thats issue.
But we've been we've been in these businesses for 30 years, we've executed well in these businesses for 30 years. We've also been a leader on providing services to those businesses that you referred to we have an active dialogue with those companies about our activities and what we plan to do.
And John Stephen and I are extremely focused on the client orientation. The client nature in the context of late we run we run the from the other firms that are out there have very very ambitious institutional capital raising plans.
From institutions.
But theres a lot of capital allocation and we're very comfortable that they can raise a lot of capital. We can raise a lot of capital. What's interesting about this business is this is a business that actually is growing secularly and so we think we're very well position given where we are both to participate but also to continue to service those clients and a differentiated value added way.
Your next question is from a line of Chris Kotowski with Oppenheimer. Please go ahead.
Yes actually my question is related to that last one which is in looking at the asset management segment and the $22 billion of mainly private equity investments.
I guess the question is.
If you put it in the context of the publicly traded alternatives Blackstone has a pretty big business and their GP investments is about a billion eight right by comparison.
And so what is the strategic need for and rationale for keeping that larger for balance sheet commitment.
So we haven't we have a differentiated model and there's no question that Blackstone operates a business with very low with with no capital. If maybe we were starting today from scratch, where the white sheet of paper you might develop the business differently, but whats happened because of the way we run our business is we've built out a very very broad deep global net.
At work.
Other investor is all over the world and we think Thats, a real asset to capital Allocators, we've done that because we've built up strength investing off our balance sheet. Historically candidly one of the things investors have like is they like the fact that we partner with them and we have skin in the game add we're committed to investments with them that align.
I think is a very very good thing and I think that will be a differentiated component of our strategy here and so strategically that's something I think that differentiates us in the context of the strategy also as we grow new products and services in the space around the world that add to what we're doing it is easier to fund the accelerate.
Ration of that if you do have the capacity to use balance sheet to jumpstart some of those businesses. So again going back to what I said before we would not expect the balance sheet to grow we would expect to change the R.W.A. density by shifting some out of equity into more credit or infrastructure type assets.
But we think we have a competitive advantage or different strategy. That's a good advantage not to partner with our clients and we plan to continue it.
Okay. That's it for me thank you.
Your next questions from the line of Devin Ryan with JMP Securities. Please go ahead.
Great Good morning, David It's Steven.
Good morning.
I guess first question here. So I saw the market SAP was rolled out last week and.
Just curious what took so long I guess to get that out and how are you thinking about integrating that with some of the other products in consumer and really integrating it with clarity money in that app as well and really the questions I'm just trying to understand some of the branding and consumer and what you're going to be using called is a digital storefront.
So on the markets up.
You know when we first began Marcus three years ago, you'll recall that.
Our two products were deposits and unsecured loans. So the utility of the App early on was not quite high meaning people, who carry alone are not looking to check on it with the frequency of those that use apps for their day to day exchange and so we sort of set a set of priorities for us.
Sales in terms of the direction, we were going to build and we would ultimately come upon the App I would say at from the moment, we began to think about the design of the App and in fact, bringing clarity money into the house. The idea was to take the best of the technology that is what clarity money had developed which was super interesting.
Saying in terms of prompts and the use of intelligence to do that and kind of a two way engagement with the user consumer the app, we wanted to embed that in a broader app that we would rollout so you're seeing the first phase of that now, particularly as people will start to engage more and more with us again with greater frequency.
Than they did at the start and we're embedding the best of what is clarity money in the context to the creation of that App overall and so it was really a question of anticipated use slower at the start faster now a question of priorities and now bringing it together on your question about branding I think I'll I'll.
I refer you to Investor day, when we'll talk a lot more with much greater context, then I could answer in a single question on the branding strategy around consumer and around wealth management more broadly.
Okay terrific looking forward to that started there just a follow up here modeling.
Comp ratio and cadence moving forward. So the fourth quarter comp ratio was about 600 basis points below the first quarter level I know that's.
Much tighter than historical relationship and I also know consistent with how you're looking to accrue on more of a real time basis.
You also had a very strong fourth quarter for equity investment performance, which I would think kind of a lower.
Comp ratio to it so I'm just trying to get some flavor for whether the 2019 Cola relationship is a decent proxy.
On a quarterly basis or due to the stronger fourth quarter or in the equity performance, maybe skew that a bit lower.
Sure. So so let me start from the top.
As you know our comp and benefits line was flat year over year and our come to net revenue number was roughly in line slightly slightly higher than where it was last last year. So thats to look at the full year.
Embedded in your question was in fact, the right reference which is as I've said several times, we are accruing for compensation each quarter as the accounting standards require which is our best estimate of the compensation, we would need and so we've done that much more on a straight line without relying or waiting on the fourth quarter.
So so as to be a bigger adjustment and so you're seeing more straight line because of that you're seeing this fourth quarter variability relative to where we were in past. That's just a function of the way in which we're now accounting again more of a straight line than not.
I would say just to step back from the particulars.
So I think that from a compensation point of view.
We had taken payroll and compensation expense down in a number of different businesses over the year in order to redeploy compensation to populations of people that are working on some of the growth businesses that we have.
By definition that compensation dollar is not producing an equal amount to revenue as it would in other areas. It will as those businesses grow and mature and so part of this is a reallocation of compensation in that direction, while maintaining comp and benefits at a constant or flat year over year.
Sure and reflecting in on the company net revenue number being roughly flat as well.
Your next question comes from the line of Gerard Cassidy with RBC. Please go ahead.
Thank you good morning.
I was wondering I mean, you may not be able to answer. This question today, which is sign and if you can't possibly you may want to give us as detailed at Investor day, but.
In the regulatory filings for all the banks as a category of loans called loans to non depository financial institutions and when we look at that for the top banks like your own the growth has been pretty impressive since 2013.
When we look at it for your organization back then there was about $6.7 billion and today, it's approximately $43 billion. So the question is.
What's in that portfolio and again, if you don't have the details I understand but maybe you could share with us on Investor day. So good details of what's in that portfolio.
Yes, so I think.
I don't I want to give you an answer with some specificity. So let me suggest that Heather minor and her team get back in touch with you and we can itemize as is publicly disclose what exactly sits in that category and we can give you some progression of of how thats migrated I just don't have the particulars around that to hand.
That's okay.
In year, that's another neutral.
When we asked this question of other banks most people don't really give us the details, but that's higher than the second question.
Can you give us some color.
Obviously.
The Applecart has received the wonderful amount of publicity and Apple as brand and of course is a card created by them another bank type of logo.
The question I have is.
Apples, obviously very respectful of their Brandon and the customers and in a recession. We all know unemployment goes up and we also know that.
Card delinquencies are linked to unemployment.
Do you have you guys is there anything that concerns you that as we go into a recession state unemployment goes the 6% delinquencies for all critical cards more than double from where we are today are you going to be hence strong.
You know trying to collect those delinquencies because of the way it's been branded as an Apple cart and Thats nothing Bill. So thanks for the question I wanted to be really clear on this notwithstanding whoever lays claim to the creation of the card is only one institution that is making underwriting decisions and Thats Goldman Sachs. So Goldman Sachs is making all.
Of the underwriting decisions as it relates to it.
We have set targets and goals and objectives.
Along with Apple as a good partner would and Apple is completely in the know as to sort of how we are going about these underwriting decisions, but the ultimate decision sits with us and so we calibrate manage our risk and collections in the context of that and so I think I just want to be really clear about that it is the.
Bank that renders underwriting decisions in that regard.
Your next questions from the line of Brian Kleinhanzl with KBW. Please go ahead.
Yes, thanks have a quicker.
It looks like on the consumer side you saw deposits go up about 5 billion. This quarter, but you seem to have better growth. When you enter into new markets is there any type of Jude graphic expansion that you're planning.
Markets business kind of accelerate growth on deposit there. Thanks, Yeah sure. Thank you.
A question has come up you know frequently obviously.
The primary growth is in the us in the UK, we've seen considerable growth in deposits, which is really pleased this even relative to the early expectations.
We have looked at a variety of other jurisdictions.
In terms of where we could raise deposits, Germany as a name has come up several times, it's natural that it would in the context of Brexit and planning and doing more asset generation in through our European business, I think we'll wait and see how things progress around Brexit the.
Size magnitude and pace of asset growth there before we make a decision about where we next plant a flag from a deposit perspective, and so there are no immediate plans in terms of a next in terms of next jurisdiction, but we continue to evaluated and we've built the platform, particularly in the UK with.
Embedding greater flexibility for us to open it were opened a new jurisdiction without building from ground zero and so it was planned with that with that in mind.
At this time there are no further questions. Please continue with any closing remarks.
Since there are no more questions I would like just to take a moment to thank everyone for joining the call on behalf of our senior management team. We hope to see many of you later this month if any additional questions arise in the meantime, please do not hesitate to reach out to Heather otherwise enjoy the rest of your day and we look forward to speaking with you at Investor Day.
Ladies and gentlemen. This does include the Goldman Sachs fourth quarter 2019 earnings Conference call. Thank you for your participation you may now disconnect.