Q3 2020 Goldman Sachs Group Inc Earnings Call
Yeah.
Good morning, My name is Dennis and that will be somewhat later today.
I would like to welcome everyone to the Goldman Sachs third quarter 2020, <unk> earnings Conference call. This call is being recorded today October 14th 2020. Thank you.
Thank you Miss minor you may begin your conference.
Good morning. This is Heather Kennedy minor 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 Dot <unk> Dot com no information on forward looking statements and non-GAAP measures appear.
Sure on the earnings release and presentation.
Oh past 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, Steven sure.
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.
Steven 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 everyone for joining us this morning, I'd like to start by saying that all of US at Goldman Sachs. You Your friends and family remained healthy in the continuing challenges with cold team.
Let me begin on page one 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 stuff.
The strength and breadth or 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 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 or are we at 8%.
Litigation cost burdened our year to date returns by over 500 basis points.
Turns 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.
Hi levels of client engagement.
Can you counter cyclical performance in market, making and positive momentum across our strategic initiatives.
We maintained our leading global position and M&A as announcements increased in the quarter from a relatively dormant period earlier in the year we.
We maintained strong lead table positions in underwriting, including a number one ranking in equity underwriting the top three ranking in high yield with both markets very active during the quarter we.
We again delivered robust performance in global markets, 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 recognize strong gains from our public and private equity positions. We also generated strong investment performance and positive net interest income that our credit portfolio.
We continued to have success with our West Street strategic solutions front were on track for $14 billion of total commitments we are.
We're delivering a full spectrum of alternatives capabilities of launch marketing, new funds and private equity gross equity and real estate.
Wealth management, we continue to provide valuable advice to our ultra high net worth PW. One clients. We also made progress integrating our new personal financial management business to provide our high net worth clients with a broader set of capabilities.
And we've been pleased to see synergies between both groups, which have resulted in 700 referrals. This year, representing over 2.5 billion I've been asked that opportunity.
In consumer we continue to have success expanding our platform to serve individuals digitally both directly and through partnerships during the quarter, we watch markets insights integrating clarity monies capabilities into the market to give consumers a more comprehensive view of their finances, we could.
We continued to make progress building checking and investment capabilities, which will launch next year on the <unk>.
On the partnership side, we watch seller financing with Walmart expanded on our June platform lunch with Amazon. Additionally, our partnership with Apple continues to grow and we look forward to leveraging our credit card platform for additional partnerships overtime.
Turning to the operating environment on page two we continue to navigate an uncertain backdrop brought on by COVID-19, which has an unclear trajectory from a macroeconomic perspective, the markets continue to benefit from the unprecedented monetary and fiscal support by central banks and governments globally.
In the third quarter, the Federal reserve announced its new approach to average inflation targeting unforecasted that short term rates would remain near zero for the next several years.
In that same vein in the UK, where the economy is expected to contract by over 9%. This year the bank of England open the door to negative rates as a potential policy tool.
Meanwhile, U.S. labor markets continued to show a headline improvement with unemployment with the unemployment rate declining to 7.9% in September down here.
Down nearly 50% from peak levels in April, reflecting approximately 13 million people out of work.
That's sad according to the latest jobs reports those improvements were largely driven by reversals of temporary layoffs, well permanent job losses have risen to nearly 4 million people, reflecting some of the deeper challenges in our economy.
Additionally, there continues to be enormous uncertainty globally and the trajectory the virus, which may impact the pace of the economic recovery as we head into the fall and winter.
In particular, we see continued challenges in the number of impacted industries, including restaurants, hospitality and oil and gas display.
Despite these uncertainties since our July earnings call, our economists expectations for 2020, U.S. GDP improves by 120 basis points to an expected contraction of 3.4%.
While global growth estimate slip 50 basis points to an expected 3.9% contraction.
Your next year estimates have strengthened with expected growth of nearly 6% in the U.S. and 7% globally.
Despite the ongoing challenges, we are seeing higher global equity markets and tighter credit spreads perhaps is a reflection of the speed of economic recovery.
During the third quarter, the S&P 500 rallied by 8% touching new highs in September, leaving the index up 4% for the year.
This year, we gain however was concentrated in the top five tech companies, which rose 42%, while the remaining 495 names in the index declined by 2%.
Equity market volatility also remains elevated with the average mix this quarter more than 60% higher than the third quarter, a year ago, the well below levels seen in March and April.
On the credit front U.S. investment grade spreads tightened by roughly 20 basis points in high yield spreads tightened by almost 90 basis points during this quarter.
As we go forward, we remain vigilant about risks in the market and potential weakness in the broader economy.
Given the uncertain macro environment, we are focused on serving our clients to help navigate this evolving backdrop.
Before turning to Stephen I'd like to spend a moment on our approach to return to office.
We've employed a number of new protocols operated safely as possible around the world.
We do this is public and private health care organizations worked tirelessly to develop therapies and vaccines, which I fully believe in time will allow all of us to return to a more normalized environment.
We are focused on helping our people come back safely as being together enables greater collaboration which is key to our culture.
We continue to apply to employ adaptable approach, which considers individual circumstances and local health recommendations to give our people the flexibility and the tools they need to return to the office safely.
We continue to make measured progress in Hong Kong and Tokyo, we ever had 60% of our people working from the office in most of Europe, right around 50% and in the UK, where it nearly 30%.
In New York, we've seen a gradual uptick since labor day with roughly 2000 people working in an office as of last week and we currently have 30% more people rotating through New York office on a weekly basis.
That said, we will continue to be nimble and remain in close contact with the relevant authorities in cities, where we operate and are ready to shift gears up the evolving situation with COVID-19 warrants <unk>.
They're all circumstances, we continue to keep the health and safety of our people, it's a top priority.
In closing I would like to thank the people of Goldman Sachs, who remain dedicated to serving our clients well managing the firm's risk liquidity in capital to ensure our ongoing financial strength and operational resiliency well.
While 2020 has been a difficult year in many ways I'm incredibly pleased with the state of our client franchise and progress Weve made in executing on our strategic priorities I will.
Look forward to providing a more comprehensive update on our investor day goals that our fourth quarter earnings call in January.
With that I'll turn it over to Steve.
Thank you David and good morning, let me begin with our summary results on page three during the third quarter. The firm performed well across all four of our business segments in investment banking or corporate clients remain very active in raising debt and equity capital. We also saw an increase in strategic dialogue following them were dormant period for.
M&A activity earlier in the year.
In global markets client engagement remains 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 the 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 offerings to individuals across the wealth spectrum.
With those headlines let me now turn to our specific business performance on page four beginning with investment banking.
Investment banking produced third quarter net revenues of nearly $2 billion up 7% versus year ago finish.
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 League tables by meaningful margin impact.
Importantly, the pace of M&A announcements has picked up considerably in recent months or announced deal volume in the third quarter was up more than fivefold versus the second quarter and our investment banking client dialogues remain active.
The bigger headline in investment banking again in the third quarter was equity underwriting, where we generated $856 million in revenues more than doubled the levels seen a year ago, marking our second highest quarter ever we ranked number one globally in equity underwriting as our year to date volumes climbed to $80 billion across.
436 deals, including 77 initial public offerings in global Ipos react we ranked number one and picked up approximately 180 basis points of market share versus last year.
We also saw strong activity this quarter in follow ons, and new products, including our participation in 21 private transactions a high profile direct listing and a number of spec IPO is providing clients advice and access to capital in various forms.
In debt underwriting net revenues were $571 million up 9% from a year ago.
So volumes normalize from the record pace seen in the second quarter.
Hi yield market in particular saw healthy levels of new issue activity already.
Our activity also included a number of novel structured transactions, particularly among industries most impacted by COVID-19, such as airlines, where we uniquely enabled clients to leverage your broader collateral base to access capital as.
As a result, we've been able to support our clients and grow our market share generating a solid number four ranking in global debt underwriting year to date. This.
This performance reflects our long term strategic focus on this business as well as the velocity of underwriting commitments on our balance sheet.
Looking forward, our investment banking backlog increased significantly versus the second quarter growth was supported by a ramp in M&A activity as I noted earlier as well as replenishment from equity and debt underwriting transactions in particular, new M&A announcements are creating a pipeline for acquisition financing in the coming quarters.
We are optimistic on activity across a broad set of sectors, including TMT fig consumer healthcare and industrials.
Revenues from corporate lending were $35 million, reflecting lower results in relationship lending, which includes the impact of tighter credit spreads on hedges as I've noted before for risk management purposes, we maintain single name hedges on certain larger lending commitments given the significant credit spread tightening over the last two quick.
Orders, we have now reversed the vast majority was the $375 million in hedge gains we saw in the first quarter.
Also of note in relationship lending, we've seen material pay downs versus the first half total notional drawn on revolvers is now down 60% from the peak and nearing normalized levels.
Moving to global markets on page five where our businesses continued their strong performance net revenues were $4.6 billion in the third quarter up 29% versus a year ago amid attractive bid offer spreads a supportive market, making backdrop and continued elevated client actually.
Liberty.
We expanded our market share this year as our focus and commitment to serve clients. During this volatile period drove results across asset classes and geographies. During the first half Mckinsey reported the Goldman Sachs Global markets delivered the best institutional client performance among our global peers our stream.
This was aided by number one rankings in both gten rates and credit and the number one global ranking in equities, which included the number one position in EMEA and tied for number one in Asia and Japan.
Turning to fit on page six third quarter net revenues were $2.5 billion up 49% versus the third quarter of 19 grew.
Growth versus last year was driven by a 65% increase in intermediation, which more than offset a 9% decrease in financing revenues in FICC.
In FICC Intermediation, we had solid client flows and grew revenues in four out of five businesses versus last year, leveraging our balance sheet to intermediate risk in a disciplined way in.
In credit performance was supported by strong client activity in the U.S. and tighter investment grade and high yield credit spreads. We also saw sustained volumes across our automated bond pricing engine.
In rates revenues rose a much stronger risk management, while client activity was solid, particularly around global central bank actions during the quarter.
In commodities strong performance was driven by our metals business and oil products amid persistent global supply imbalances in may.
In mortgages revenues rose amid higher levels of client activity in agency products bolstered by solid risk management and tighter spreads in.
In currencies revenues were stable as we continue to serve our global client franchise with contributions across both Gten and emerging markets Lastly, in FICC financing, we saw lower revenues and repo and structured finance.
Turning to equities net revenues for the third quarter were $2.1 billion up 10% versus a year ago equities.
Equities intermediation net revenues of $1.5 billion rose, 36% aided by higher client volumes across derivatives and cash, reflecting the scale and breadth of our client franchise in during.
In derivatives, we saw solid activity in flow structured and corporate transactions across both the U.S. and Europe.
In cash we help clients execute across both high and low touch channels.
Equities financing revenues of $585 million declined 25% year over year due to higher net funding costs, including the impact of lower yields on our liquidity pool importantly, average client balances rose to near record levels.
Across global markets, we continue to invest in technology platforms to enhance client experience build on our strength in risk management and drive resource efficiencies like digital trends across many industries COVID-19 has accelerated client adoption and onboarding across our automated platform as well.
It remains difficult to predict client activity and we do not have insight into the forward opportunity, we take confidence in the market share gains experienced by the business through a deepening sets of client relationships, which has been a priority for the global markets leadership team. This.
This progress should support revenue sustainability as we go forward we.
We also believe the upcoming U.S. election, the variability of economic growth outlook and the 2021 global LIBOR transition may bolster client activity across markets. Additionally to the extent that sustained low interest rates have their intended effect of stimulating economic growth and recovery client activity maybe.
Be further invigorate it.
Moving to asset management on page seven.
In the third quarter, we generated segment revenues of $2.8 billion up over 70% versus a year ago. Our third quarter revenues were driven by the continued market rebound event driven activity and positive corporate performance of our portfolio companies manage.
Management and other fees totaled $728 million up 10% versus a year ago, driven by higher average assets under supervision, partially offset by a lower fee rate due to mix shift given growth in liquidity and fixed income products.
Equity investments produced $1.4 billion of net gains aided by appreciation in our public investments and valuation marks related to event driven activity across our private equity portfolio more so.
More specifically on our $3 billion public equity portfolio, we generated nearly $800 million in gains from investments, including Big Commerce, Avant door sprout and head Hunter and.
And on our 16 billion dollar private equity portfolio, we generated gains of more than $400 million from various positions with the majority driven by events, including corporate actions such as Fundraisings capital markets activities and outright sales. Additionally, we had operating revenues of $230 million.
Related to our portfolio of consolidated investment entities fine.
Finally, net revenues from lending and debt investment activities in asset management were $589 million on revenues from Eni and gains on fair value debt securities and loans this year.
This reflected modestly tighter credit spreads on our portfolio of corporate and real estate investments, which continued to rebound from the broader market sell off in the first quarter.
Let me now turn to page eight where we continue to provide transparency on the composition and diversification of our asset management balance sheet.
On the left side of this slide is our equity investment portfolio by sector geography, and vintage our private portfolio remains highly diversified with over 800 positions were excluding global Atlantic given its announced sale, none or larger than $425 million.
We also provide insight into our $21 billion portfolio of Cie is primarily comprised of real estate investments of which $12 billion or financed predominantly by nonrecourse debt to pay.
Portfolio remains diversified by geography, and real estate sector.
On the right side of the slide we show our $31 billion in lending and debt investments in the portfolio within the asset management segment, which includes $14 billion of debt investments and $17 billion of loans that are largely secured.
I'll now turn to consumer and wealth management on page nine in this.
In this segment, we produced $1.5 billion of revenues in the third quarter up 13% versus a year ago, driven by higher wealth management, a U.S. and higher consumer banking revenues wealth management and other fees of $957 million rose, 9% versus last year, reflecting increased.
Client transaction activity and higher assets under supervision, which rose, 8% to $575 billion, including 24 billion of positive net inflows over the past 12 months.
Consumer banking revenues were a record $326 million in the third quarter jumping, 50% versus last year, reflecting net interest income from credit card lending strong year over year deposit growth and lower deposit rates.
Consumer deposits totaled $96 billion, reflecting $4 billion of growth in the quarter. The slower pace was expected as we continue to limit UK new account growth in light of regulatory caps and reduce the rate on our U.S. market savings accounts, given the lower interest rate environment.
While we exhibited improving beta in our deposit book, we saw very limited outflows of deposits consistent with our expectations. Despite two rate cuts during the quarter.
Funded consumer loan balances remained stable at $7 billion of which approximately 4 billion were from Marcus loans and $3 billion from Apple cart, we continue to prudently risk manage these portfolios and have moderated growth relative to initial budget estimates, while we remain attentive to the embedded risk.
We continue to be pleased with the credit performance of these portfolios.
Next let's turn to page 10 for our firm wide assets under supervision.
Totally U.S. decreased slightly to two trillion dollars during the quarter, but are up approximately $275 billion versus a year ago. Our sequential decline was driven by $90 billion of liquidity outflows following strong inflows in the first half.
That offset by $51 billion of market appreciation and $18 billion of long term inflows on.
On page 11, we address net interest income and our lending portfolio across all segments.
Total firm wide Eni was $1.1 billion for the third quarter up versus a year ago, primarily reflecting growth in the firm's balance sheet, particularly in global markets as well as the benefit from deposit growth and repricing in consumer and wealth management.
Importantly, as I have noted in the past our overall results are less sensitive to lower interest rates than many traditional banks our balance sheet is modestly asset sensitive given our mix of high turnover or floating rate assets and predominantly hedged or floating rate liabilities. Nevertheless, even if interest rates remain low.
So we expect Eni to gradually expand over time, given our ability to prudently grow loans and further repriced consumer deposits.
Next let's review loan growth and credit performance across the firm our total loan portfolio at quarter end was $112 billion down $5 billion sequentially driven by a $7 billion decrease in corporate loans from pay downs in relationship lending and a 1 billion dollar reduction in markets in.
Element loans offset by modest growth in wealth management and credit card loans.
Our provision for credit losses in the third quarter was $278 million meaningfully lower than the 1.59 billion taken last quarter and down 4% versus a year ago.
This lower provision versus the second quarter reflects relative stability in our portfolio and improvements in the broader economic backdrop, which is the dominant driver of inputs to our modeling approved reserves.
At quarter end, our allowance for credit losses for both loans and commitments stood at $4.3 billion, including $3.7 billion for funded loans. Our allowance for funded loans was stable versus last quarter at 3.7% for our $100 billion accrual portfolio, including an allowance.
For wholesale loans of 2.8% and for consumer loans of 16.1%.
The provision of 278 million includes wholesale impairments of approximately $230 million, primarily relating to select credits in the TMT industrials and natural resources sectors.
During the quarter, we recognized firm wide net charge offs of $340 million, resulting in an annualized net charge off ratio of 1.3% up 40 basis points versus last quarter.
Next let's turn to expenses on page 12.
Our total quarterly operating expenses of $6 billion increased 6% versus last year with compensation expenses up 14% year over year amidst higher revenue growth net of provisions and non comp is it non compensation expenses down 2%.
Higher compensation expense reflected year over year growth in revenue net of credit provisions. Our noncomp expenses were slightly lower versus last year as we continue to invest in new businesses, including transaction banking and credit card as well as the United Capital acquisition now rebranded personal financial manager.
While we benefited from lower expenses of approximately $100 million from the temporary reduction in travel entertainment and advertising expenses due to COVID-19. We also saw an approximately $90 million reduction in litigation and professional fees and a roughly $50 million reduction in double.
Occupancy related costs from our new facilities in London, and Bangalore Route.
These were offset by roughly $60 million increase in activity related expense from brokerage clearing and exchange fees as well as a roughly $85 million increase related to technology investments across the firm.
Our reported year to date efficiency ratio was 69.6%, which was burdened by nearly 10 percentage points of litigation expense, we continue to make progress on our expense savings initiatives as set forth at Investor Day, and we'll continue to assess our ability to go further than what we outlined in January.
Finally, our reported tax rate was 28% for the year to date, reflecting the impact of non deductible expenses. As noted previously we expect our tax rate under the current tax regime to be approximately 21% over the next few years.
Turning to our capital levels on slide 13, our.
Our common equity tier one ratio improved to 14.5% at the end of the third quarter under the standardized approach up 120 basis points sequentially.
The improvement was driven primarily by earnings as well as lower market or a W ways, reflecting reduced market volatility and lower credit RW ways or ratio under the advanced approach increased 110 basis points to 13% also on earnings and our W.A. reductions from lower market volatility.
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We are confident in our capital position now 90 basis points above our 13.6% stress capital buffer requirement look.
Looking forward, we continue to believe that the 13% to 13.5% standardize see Q1 target range provided at Investor day is appropriate for our firm on a medium term basis as we execute our strategic initiatives build more durable fee based revenues and reduce the stress loss intensity of our business.
To that end, we will continue asset harvesting, including our announced sale of global Atlantic.
While our capital ratio will likely remain elevated near term given continued regulatory restrictions on share repurchases. We would expect our management buffer to decline over time, particularly as markets expressed less volatility.
Importantly, we stand ready to commit capital and balance sheet to support our clients and we expect to resume share repurchases once permitted consistent with our longstanding capital management policy.
Turning to the balance sheet total assets ended the quarter at 1.1 trillion dollars roughly flat versus last quarter, we maintain very high liquidity levels with our global core liquid assets, averaging $302 billion up modestly versus last quarter, reflecting the current backdrop we.
We expect our GCL a will evolve in the context of client demand for our balance sheet and overall market conditions on the liability side, our total deposits decreased to $261 billion down $8 billion versus last quarter, driven by planned roll off of higher cost brokered deposits and more.
Modest growth in retail deposits, our long term debt declined by $9 billion during the quarter driven by maturities, we expect issuance to remain relatively low for the remainder of the year. Although we may consider prefunding. Some planned first quarter 2021 issuances.
In conclusion, our strong third quarter results reflect the diversification of our client franchise resilience of our business model and flexibility in our highly liquid balance sheet.
Despite the continued overhang from COVID-19 and challenges from the work from home environment, We continue to leverage our technology platforms and intellectual capital to support our clients. During this difficult time, we remain dedicated to executing our strategy in our core business and driving forward the new initiatives and operate.
King efficiency programs, we laid out in January and.
Importantly, we have been proud to see our dedicated client engagement efforts continue to pay off resulting in gains in mind share and market share as we help clients navigate this volatile environment on.
On the Ford our risk managers will remain in a conservative posture, given the uncertain trajectory of the virus and early stages of the recovery to ensure we are well positioned to predict proactively support our clients well our.
Well our path to our medium term targets will inevitably not be a straight line. We remain confident that execution of our strategic plan will drive better client experience more durable revenues and higher returns for shareholders over time with that thank you again for dialing in and we'll now open the line for questions.
Ladies and gentlemen, we will now take a moment to compile the acuity roster.
So first question is from the line of Glenn Schorr with Evercore. Please go ahead.
Hi, Thanks very much.
Hi, Alan So obviously hello.
I see great great trading results.
I'm curious if you could.
Their eyes any how do you think.
You think about any incremental risk you take to execute all that and if there is any impact on pizza stress test.
I'm just I'm, just looking to balance client franchise with any any risks associated with it. Thanks Sean.
Sure Glenn Thanks, So I would say.
I would say the performance of of the the trading businesses in the third quarter frankly like it was in in.
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 and trading on that risk very efficiently and so we could see the kind of turnover that we needed and we didnt see dramatic pickup in risk occasioned by that pattern and that strategy and I think that leaves us in a in a good possess.
Question with respect to what.
What we what we will submit as part of the second version of C car.
I don't see our risk is being unusually elevated in the context, producing these kinds of results.
But that's great.
And then I missed it I don't know if you gave us the realized or unrealized split I think I wrote down everything you said on the equity and I'm talking equity investment line.
I couldn't tell how much of it was actually realized and the lead or the follow on to that is it.
Is.
Have you considered monetizing more with with markets at all time highs, yet, but pretty seasoned portfolio with two thirds in the four to eight years old plus range.
Some look and just see how you balance the capital intensity of those investments with the earnings power and what your capital deployment options are right now thanks.
Thanks sure sure no problem. So so let me just go through the breakdown in equity so of the $1.4 billion in revenue our public portfolio generated $781 million in in revenue and the private part of the equity portfolio generated 642 million no important.
When you look at the private portfolio $284 million. So Thats 642 was generated on events. So thats sales monetizations ipos and the like and for.
And 52 million only $52 million was non event driven that is looking at the baseline performance of the underlying company and making a judgment about where value is appropriately packed and so event being the dominant component of the private portfolio the balance I should point out of 306 million.
[noise] relates to Cie is as it relates to the public portfolio, we observe the market no differently than you do obviously.
Obviously, there is a certain component of that public portfolio that remains restricted.
Decent amount of it remains unrestricted and we.
And we will look for opportunities as 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 contest context of the kind of broader strategic mission, we've been on which is to lower the balance sheet intense.
I'd and capital intensity of that as we shift to more third party investing itself and so that gives you a bit of the lay of the land us to the two components to your question.
Thanks, So much appreciate it sure.
Since from the line of Christian Bolu with autonomous. Please go ahead.
Good morning, David and Steven maybe sticking with the trading question. Steven you gave some pretty interesting color on why you think trading revenues should be sustainable into 2021.
Can you expand windows, a bit, particularly interested in your point around libel transition just.
Just just give us more detail there and sort of why you think Goldman as well please to capitalized.
Sure So why don't I start with trading.
I think at the core our view on sustainability is not with you know 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 in among various clients sets across all of the businesses in our trading business and this.
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 1000 clients that matter to the trading division. So the sustainability of our performance for me is rooted more in the fact that we picked up share gains we were.
There for clients, particularly 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 Mike.
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 your selection LIBOR transition the trajectory of Cove at any one of those and part of the reason that we are at capital levels. We are.
Our part of the reason we've maintained higher liquidity than we ordinarily would is such that we can serve clients should that volatility occur without putting ourselves off sides on any one of those metrics and 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.
We've put our financial resources in a prop proper frame.
To sort of play on 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 for that onset.
Great. Thank you.
Maybe switching to acquisitions again, maybe David this one's for you given the frenzy at Morgan Stanley on deals I'm, just curious how youre thinking about M&A, maybe what businesses or initiatives that benefit from.
Acquisition and then if you could just touch on how you think your relative currency adds of capital position places you to do a transformative deal.
So Christian I appreciate the question and of course, we laid out a medium term plan, what 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 overtime. We now have the business. We think fully set up an organized after we resegmented last year and made some changes internally so that the platforms that we think we can rely.
They operate from a well positioned to grow 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 as a corporate investment bank, we have a big asset management platform, which is global broad deep multi product all over the world. We think there are opportunities to continue to grow that organically.
For sure, but certainly we 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 I.
That job that we think accelerated our expansion into high net worth I wealth in a meaningful way. We've now been integrating that quite successfully so we continue to look broadly of 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 tolerated.
Tangible book value dilution in the context of something they think it's on strategy and advances the trajectory of the business. So we'll continue to look at.
And see if there are opportunities, but other than that it would be hard for me to say anything more at this point.
Okay. That's helpful. Thank you David.
From the line of Mike carrier with Bank of America. Please go ahead.
Okay.
Good morning, and thanks for taking the questions.
First one just on the efficiency ratio you guys need to 60% this quarter and year to date ex the legal your assets, 50% I guess, you did take where the operating leverage clearly works in the model can you provide some color maybe where you're at in the like the investment at the three year timeline and most of its just.
To help with the expense and mine in the efficiency ratio, depending on how the revenue backdrop lays out ahead.
Well I'll start and Stephen might give some more granular detail, but I'd say at a high level. Michael I. Appreciate the question. There's no question that our efficiencies benefited from an environment, which has allowed us an opportunity in some of our businesses.
To capture more revenues.
And some of that as Steven highlighted is really due to market share gains and we think that will be more sticky some of it is due to the environment.
We Theres no question as we looked at our kind of three year trajectory and thinking about our desire to run the far more efficiently that this environment of 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 are we've learned that may create more opportunity.
These two us 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. Steven is there anything you'd want to add to that Mike. The only thing I would add to David's comment is that you know 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 automating what goes on.
In risk and the various control functions and equally automating platforms that have captured the attention of clients sets I'd also say that you know.
Look it's hard to look at one quarter as a spot for efficiency. Obviously, it's important to look at the whole year, but equally you know 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 call, earning 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 automated and therefore, we move away from.
The compensation intensity associated with those businesses.
As a general matter. So I think there are a number of levers to pull over the medium term.
All right that's helpful and just.
Follow up on blend that manages question.
And the things you see them in a private companies as they have been slower to rebound given the economic backdrop. So any insight you can provide on oil companies either those facing more like totally related pressure those that aren't that was an impact beyond the baseline.
Beyond the baseline.
Sure. So as we as we looked across the portfolio and we did it in in the first quarter did it in the second and again did it and third we look at those that are most acutely impacted by coded there.
They're circumstance in some sense hasn't changed and you know they remain kind of untouched from the downward mark pressure and valuation that we saw in the first and second quarter there are.
There are others that have turned.
Turned the corner as being infected affected by Cove, it and that is.
And that is as much a function of where the market is moving where consumers are moving and the like and 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 of Covidien pack and equally we look obviously at the underlying performance of the bid.
Yes, and not exclusively as against public market Comparables and the like and by the way. This is of course for that part of the private portfolio not otherwise mark given other events that are going on and so that's the frame remains the same in terms of how we look at their portfolio itself.
Your next question is from the line of Betsy Graseck with Morgan Stanley. Please go ahead.
Hi, Good morning. This is my not precisely on from Betsy Graseck I wanted to ask on your capital levels. I know you said you expect to manage to about a 30 to 30 in and out to San Cetone ratio overtime, but can you say.
Can you speak to where you expect to maintain a capital in the near term at least till the 2020 Watts test asked do you expect.
Do you expect to maintain the same buffer over the required minimum as you did this quarter or.
I mean, I know you mentioned that you could see a strong activity in the pockets in fourq here with the elections and about the Korea about.
Is there more room to be that Mark and bill and maybe increase exposure AD bucket RW agents and the fourth quarter sure.
Sure. So I think we've we've brought our cetone ratio to 14, five really to sort of fixed 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 to the extent that that volatility subsides, we will see the buffer come down and we'll adjust again consistent with with where we are on the on the longer term trend you know over the medium to long term.
Reinforcement of 13 to 13 and a half 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 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 immediate term will move more in that direction.
Great. Thank you and can you talk a little bit about what you're seeing on the M&A advisory fraud, we're saying the announcements come through we have voted on in the industry M&A announcements have been pretty strong third quarter.
Can you give us some more color on what you're hearing from corporate sponsors and how long.
How long do you think this increase in that outspend gap.
Okay assessed and to enter next year.
So there is no question that earlier in the year given the 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, I knew announcements and activity levels were quite well Steven.
Stephen make comments with respect to the pickup in our backlog.
We've seen an increase in activity I think we see an increase in activity and announcements, but also an increase in dialogues 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.
But CEO confidence in the dialogues, we're having it certainly has certainly improved against that backdrop I would expect to see numerous companies trying to take advantage of the opportunity to consolidate and strengthened position I think one of the things going on in the crisis is people are seeing that there continues to be efficiency and scale.
As the World continues to digitize it requires greater investment and that obviously advantages companies with scale. So our base case based on what we're seeing is that this 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 I understand that if for some reason the course of the pad danica the economic trajectory chain.
Some of that confidence, it'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 Hawken would you be EPS. Please go ahead.
Good morning, and thanks for taking my questions.
David you referenced that you would be provide an update to the strategic goals.
Goals and targets that you laid out on the fourth quarter call and you said you are committed.
We remain committed to those to those goals. So that's encouraging and certainly in light of a.
Some of the stories, we have seen.
In the press, which were a little confusing.
But I wanted to number one confirm that that.
That the that's.
That's a few of the press.
Press reports that you are considering backing away from that targets and also here how loan and deposit growth experience through 2020 has compared 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 as a hindrance to Eni I like how temporary is that likely to be thanks.
Okay sell them, so that a couple of things first and I 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 consider changing our targets has been no discussion about it and so we're committed to our targets and we're making progress on the targets and so I don't have anything really.
I want to say about the article other than it was incorrect.
With respect to.
The second part of your question.
And I'm, sorry, I am now on the third part of your question, we're asking about deposits or something the middle right Millones Oh about.
Just on the ground and lending versus our expectations before the sure. So when you look at deposits that's right deposit growth loan growth. When you look at deposit growth, what I'd say and we talked about this in last quarters call deposit growth and the acceleration of our ability to attract digital deposit definitely accelerated during this year.
Because of the pending pandemic faster than we had expected we've obviously been managing that flow and you saw this quarter based on actions. We took that we slowed down the growth in that deposit rate, because we had well exceed what we expected to do from a 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.
40 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 didnt seem as we're entering the pandemic and there was such uncertainty during the bulk of this year that we should be leaning into are driving those targets my expectation my expectation would be if the economic environment continues.
To improve you will see an improvement in that loan growth as we head into 2021, but we'll continue to monitor that approach.
Appropriately and cautiously.
That's 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.
Cool and consider a competitive dynamics and the like but any additional color you can provide there and when we think about comp ratio should we think about it net of provision or gross yeah.
You referred to I think Steven you referred to it net of provision in your prepared remarks, but in prior in prior times that was referred to as gross so just wanted to try to square that a bit and I think at a high level. So it's been at a high level and Don and Steve.
Stephen May make comments on 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 costs in some of our businesses that had historically and so we always 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 to pay off.
People competitively and protect our our franchise pcls our cost of doing business. It's a reflection of the capital that's embedded in the business and it obviously affects that judgment 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 PCL.
Given the nature of the time, where are 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 had excellent people in a number of businesses that need to be paid when not when people perform.
And we'll stay very very focused on making sure that we're competitively well positioned but you're seeing some of the operating leverage come through on the business I mean, 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 is no. 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 is is carrying itself and 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 duties. Please go ahead.
Great. Good morning, Thanks for taking the questions first question just want to touch on the stock for a moment I'm just looking at the.
Looking at the stock you the prices down $20 year to date.
Book value is up about $10 you put one MTB behind you get a record.
EPS quarter today, So just want to talk a little about how you guys talk about the stock price internally you essentially.
Have laid out a transparent plan for the business you set long term initiatives and apply a business shift towards higher multiple areas and so I'm. Just curious if the mentality is that as you execute on the plan over time the price, we'll just take care of itself for or maybe getting to a point, where it makes sense to take more of a stand around the stock.
Given that has implications for how you run the business.
Well I I.
You know I think Devon, you've laid this out very well we've put out a plan. We believe we are 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 you know our assumption is if we continue to deliver consistently.
Over the medium and longer term shareholders will benefit the stock price will perform.
Okay.
Got it and then just a follow up here on the consumer business and there is several changes to leadership in consumer and wealth during the quarter I'm. Just curious if that implies any focus and shift in the business or just any color around applications, there to strategy or how the business is wrong.
The.
So so there is no focus there is no focus and strategy or how the business should be run one of the things that that that that I believe very strongly and that we've been driving toward as a management team. Since we we took over as a management team two years ago was getting the way we talk about the business.
Hi to be set up in a way we could transparent we talk about our different big business platforms.
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 have different divisions internally. We made segment shifts at the end of last year to set up the platforms. The way, we expect it to run them and the announcements we may need now get people who are driving the strategy.
Moving those platforms floored 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 and so there is no change, but rather just a continuation of the journey we've been on to get the pharma lined up and set up now with these four big platforms that we really think we can drive growth over time.
Given the only thing I would add just to touch on the specifics of performance within the consumer business. So.
Overall, the market is 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 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 both the loss behavior, if you will or the credit behavior 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 or a function of how we've managed underwriting on the entry how we've managed a customers under consume under customer assistant plans and the like and so.
That just gives you a sense of where performance lies in the context of Davids 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, what I read in search of excellence at Sands stick to your knitting not sure. If you recall that all book.
And maybe it's just.
Maybe it's just too ancient but when I look at your business.
The capital market side.
And you're clearly gaining wallet share reminds of 2009, when you were successful in supporting your customers through the last recession.
And.
And on the other had the fancy businesses.
Buying into credit cards, one concern I hear as you are buying into a lower PE activity I, you've certainly seen committed on that that strategy, but it seems like there are still questions. There. So specific questions on the decide where there's a lot more confidence that legacy businesses capital markets.
Your M&A backlog, how does that compare to the all time high and.
And trading by how much has the Wallace again due to the environment.
Hi, guys. This is so high versus new business. So that's on that on the positive side and on the left cop inside the gross.
What you bring a when you buy a credit card that the seller buzzard, providing before thanks.
So there was there was a lot there Mike and so if I am I appreciate all the questions. If I don't 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.
But as.
As I as they try to tick through an answer first on M&A backlog.
I think Steven 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 at its all time high with.
With respect to market share gains in global markets I I think the market share gains we believe as a management team at the market share gains are rooted and an evolution back of our strategy to really being very very client centric. One G.S. approach I'm really trying to think about how we as an organization deliver for our CLI.
Hi, it's in a very central way this quarter 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.
Racked with us and our ability to serve our clients and we think thats, helping our market shares I 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 in the volatility in markets, but I think the market share is coming from the way we're executing.
Strategy, and we began that focus well before cold we began that focus two years ago and I think we're really getting results from that from that from that investment.
The third thing with respect to the credit card business, it's hard to imagine weren't any business that has a lower <unk> lower PE and the current PE that we trade at <unk>, but when you.
But when you when you 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 what we believe in it but we want to be perfectly clear this is not.
And it's going to be built over a long period of time, just like we now sit today with an extraordinary asset management franchise, where we have over two trillion dollars of assets under supervision. That's been built over a very long period of time.
And we believe it's really accretive to the value of Goldman Sachs and our shareholders over a very long period of time and so we're going to continue to work at this cautiously I know the skepticism out there we're going to prove over time as to why we think it's right well continue to adapt.
And I'm going to ask a.
Question, that's not really your responsibility, but it goes back to the earlier question on a day like today and last quarter, the markets and giving you a pea of one or even less when your earnings and I think there's a disconnect between the the lumpiness.
Your capital markets revenues with the annuity like nature of your customer relationships. So I'm not sure if theres any way.
That you could put in context.
The recurring nature.
The bulk of the capital markets activity, even while parts or are lumpy and that's I think some shareholders are very frustrated.
As it was reflected by the earlier question and so I know your view is look or stock prices fall earnings you've had a focus on growing book value, let's grow book value and everything else will take care of itself is is that still the way you think about that.
Well I I think your last statement is true, but I'll make a couple of other comments that at a high level and.
It would offer a perspective and I know I know, Mike you'd have a perspective on this too.
But 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 I the banking sector in financials broadly are well out of favor and 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. You know people are pretty clustered in the neighborhood. I. You know is that something that I think is permanent I don't think its permit Ken can you and I both speculate as to reasons why people feel that way at this point.
The cycle and with some of the uncertainty absolutely I do think to your point the client franchise in the capital markets revenues that we have.
Or if you're looking at it not quarter to quarter, but over periods of time as a franchise business there.
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 flame through which you look and 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, so 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 add 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 on overtime I believe the stock price will fall.
You know Mike an interesting developments is to amplify on David's comment, which is that even in the trading businesses, which one could argue or volatile in the context of the market.
On certain of the electronic platforms that we're seeing and I would 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 that and the disposition of those clients, but we're seeing a growing presence there attachment to those two those platforms, whether it's more key or other.
The rise is sticky and tends to stay there, perhaps even more than what you might see in in a high touch versus low touch and getting into that in the business that you would not otherwise expect to be as predictable. If you will I think it's 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 Cetone ratio I know theres been a meaningful reduction in the RW wave quarter on quarter and I heard you talk about some of the environment as being probably seasonality impacting that because you got to tease out the change in the R.W.A. between what was more seasonality I'm activity versus where you actively managed those are the ways.
So to answer you got over your Sep minimums, yeah. 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 at higher than not by virtue of volatility otherwise on a quarter on quarter basis, you see the position will 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 our WH deployment or otherwise was.
Okay, and then when you think about the cetone ratio targets as you're running through obviously those things.
Phebe would improve for you from here. So what are the kind of some of the actions that you're taking for it to get the FCB lower so that you can run a 13, if their cut in half with a management buffer.
Over the near term sure well I think over the 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 in 10.
City 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 on the capital calculation. So I think all of those are geared with an eye toward reducing down as I said stress loss intensity, and ultimately leading to or a lower SCB itself.
Your next question is from the line of Jim Mitchell with Seaport. Please go ahead.
Hey, Good morning, maybe you know I appreciate the commentary around M&A.
And then maybe the spillover impact on acquisition advance, but if we think about what's been going on the share in terms of the significant capital raising both equity DCM, how do we think about that going forward. It. It sounds like you replenish some of the coffer in terms of the pipeline how how much demand is there to shore up balance.
It's in.
For capital markets activity or is it kind of again anything where M&A picks up and capital raising comes down or we don't really grow banking much just trying to think through that that level of activity.
So Jim I think it's I think it's a hard thing I think it's a hard thing to to look at and predict with granularity. There is no question.
That the environment pulled forward both pulled forward some financing for companies and also created a whole bunch of financing that if we didn't have this environment. It wouldn't have happened and so there's no question that financing levels have been elevated during this year.
At the same point in time, if again 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 huge franchises, we have leading Sharon will well position I believe over any period of time three years five years seven years 10 years, 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 helped drive earnings growth and book value growth and so you know 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.
Then 2020 one that we saw in Twentytwenty as people tried to adapt and finance themselves out to create more runway given the uncertainty in environment and so again big franchise big opportunity.
And you know whatever the market puts forward I think we're well positioned to serve our clients and capture.
Well, maybe as a follow up too on that just maybe you could update us on your efforts to kind of expand market share you've talked about going down down market into the middle market. How has the progress been on that.
Progress the progress has gone I appreciate the questions and the progress is going quite well and I think one of the things that that I know is self evident to everybody on the call as market cap grows there are more and more companies that growing to be worth 500 million a billion $2 billion that have never been on our radar screen. So that footprint has expanded media.
Play if theres been hundreds of millions of dollars of revenue accretion based on the opportunity set that's come from that I think that will continue so 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 acid.
Asset management acquisitions, along with that I know you mentioned are we in our key CE, you've always been very cognizant of having a lot of goodwill and you don't have so much but.
So what's your appetite for asset management deals and what's your appetite for goodwill I do you still have the same focus and are we as much as ever.
I I think Mike that on that I'm, not going to say anything in response to this that that's different to what I said, just a few minutes ago. We.
We are we're making investments to grow our business and asset management business organically certainly the strategy, we've laid out in alternatives and the mix shift and the way we're approaching that as an organic effort. We certainly are aware of the continued consolidation that's going on in the asset management industry. We feel we're 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 with 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 white opportunity for you know for us at the moment and so we'll continue to grow.
To grow the business organically if the right thing came along Inorganically, we 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.