Good morning. My name is [Katie] and I will be your conference facilitator today. I would like to welcome everyone to The Goldman Sachs third quarter 2026 earnings conference call. On behalf of Goldman Sachs, I will begin the call with the following disclaimer. The earnings presentation can be found on the investor relations page of the goldmansachs.com website and contains information on forward-looking statements and non-GAAP measures. This audiocast is copyrighted material of The Goldman Sachs Group Inc., and may not be duplicated, reproduced, or rebroadcast without consent. This call is being recorded today, October 13, 2026. I will now turn the call over to Chairman and Chief Executive Officer, David Solomon, and Chief Financial Officer, Denis Coleman. Thank you. Mr. Solomon, you may begin your conference.
Thank you, operator. Good morning, everybody. Thank you for joining us. We delivered very strong performance in the third quarter, generating net revenues of $18.7 billion, the second highest in our history, earnings per share of $17.01, an ROE of 18.7%, and an ROTE of 20.5%. Our quarterly results included the impact of an accelerated charitable contribution. Excluding that contribution, quarterly EPS would've been approximately $18, and ROE and ROTE would've been approximately 20% and 21.5% respectively. For the year-to-date, we delivered record revenues driving an ROE of 20.7% and an ROTE of 22.4%. While the third quarter began with optimism around a potential resolution of the conflict in the Middle East, renewed geopolitical tensions and continued disruption of energy flows added complexity to the outlook, increasing oil prices, reigniting inflation concerns, and driving bond yields higher.
Against this backdrop, the Fed raised rates in September for the first time in three years, with markets pricing in approximately 75 basis points of additional tightening in this cycle across the U.S., U.K., and Europe. Despite these crosscurrents, the health of the underlying U.S. economy has remained solid, with strong corporate earnings growth, GDP growth of 2.2%, and a very resilient labor market. In complex environments such as these, clients rely on the advice, execution, and intermediation expertise of Goldman Sachs to navigate uncertainty and advance their most important strategic priorities. In global banking and markets, we generated the second highest revenues in our history. Within investment banking, advisory revenues were a record, and we maintained our longstanding number one position in M&A, advising on $1.5 trillion of announced transactions for the year.
We maintained our year-to-date lead over our closest peer of approximately $430 billion, the largest lead we've ever had, as clients turn to us for advice on significant transactions, including Hugging Face's $13 billion sale to NVIDIA and Integer Holdings' $6 billion sale to KKR. As you'll remember, we entered the quarter with our highest backlog in five years, and even with exceptionally strong revenue production in the quarter, our backlog remains very robust, reflecting the strength and breadth of client engagement across our leading investment banking franchise. In equities, we delivered our second-best performance after last quarter's record results, with strength across both intermediation and financing. In FICC, we remain steadfast in supporting our clients' global risk intermediation needs across asset classes amid sharp moves in rates and increased volatility in commodities.
Importantly, financing activities have become a larger and more durable component of our markets businesses, representing over 40% of FICC and equities revenues year-to-date. This progress reflects strong client demand, prudent balance sheet deployment, and continued execution against our strategic priorities, including deliberate multi-year investments in Asia, which we highlighted earlier this year as an opportunity to drive further share gains. This dynamic market backdrop has also reinforced the importance of trusted advice and diversified investment solutions for asset and wealth management clients. Our scaled and durable platform brings together leading investment capabilities across public and private markets and delivers them through deep institutional relationships, our ultra-premier high net worth wealth management franchise, and our expanding third-party distribution network. The strength of this platform continues to drive exceptional growth at scale.
In the third quarter, management and other fees increased 22% year-over-year to a record $3.6 billion and surpassed $10 billion for the year-to-date. Our assets under supervision reached another record of $4.1 trillion, supported by $97 billion of long-term net inflows, representing our 35th consecutive quarter of inflows. In wealth management, $47 billion of long-term net inflows contributed to record client assets of $2.1 trillion. For 2026, wealth management long-term net inflows are annualizing at 12%, well ahead of our 5% target, which underscores the strength of our client relationships built on trust and long-term performance. In alternatives, we are driving strong growth, with alternative assets under supervision up 26% year-over-year to a record $491 billion.
We continue to see strong momentum in fundraising, with $37 billion raised in the quarter, driving a total of $122 billion in fundraising for the year-to-date, reflecting investor demand for experienced investment managers. Considering the strength, we now expect full year fundraising of roughly $150 billion. Given the sustained levels of investment performance for clients, our leading asset and wealth management business remains very well positioned for continued growth amid attractive secular tailwinds. At the same time, we are also inorganically accelerating growth and building a stronger platform with a better product offering for clients. In August, we announced agreements to acquire NEOS, a market leader in derivative income ETFs with approximately $35 billion in AUM at quarter end, and LCN Capital Partners, a leading triple net lease investment manager.
The NEOS acquisition would bring our global active ETF assets under supervision to over $90 billion, establishing Goldman Sachs among the top eight providers by assets under supervision and top six by revenue. While LCN broadens the range of private real estate investment solutions we can offer. Importantly, these acquisitions also bring talented and entrepreneurial teams to Goldman Sachs. We remain focused on opportunities that enhance distribution, deepen investment capabilities, and add products to strengthen asset and wealth management. Our bar for strategic financial and cultural fit remains very high, and we will continue to allocate capital dynamically and with discipline as we drive growth. All in, our record year-to-date revenues are the result of years of focused execution that have strengthened our market-leading businesses and increased connectivity across the firm as we harnessed the power of One Goldman Sachs.
Importantly, we have created a higher revenue base with our more durable revenues having more than doubled since 2020 Investor Day, and now representing approximately 45% of revenues for the year-to-date. The increased durability, coupled with our expense discipline and prudent capital management, enhances the resilience of our earnings and supports higher returns through the cycle, providing Goldman Sachs with an even stronger foundation for growth. Looking forward, though uncertainty persists, corporates and investors recognize that standing still can be a competitive disadvantage. Clients are taking action to modernize operations, secure critical capabilities, and reallocate capital towards their highest return opportunities. All of this is driving demand for M&A, capital formation, financing, risk management, and advice, playing directly to the strength of our franchise. An ongoing theme has been the growth in AI infrastructure investment.
Recent studies estimate that the U.S. data center build-out could require north of $10 trillion in investment through 2032, averaging roughly 3.6% of U.S. GDP annually. In our conversations with clients, demand for compute significantly exceeds supply at the moment, creating opportunities to help develop financing structures to meet that capacity shortfall. Our differentiated financing, distribution, and investing capabilities position us to play a meaningful role in the mobilization of capital and supporting client activity. While we are proud of the privileged position we play in the AI investment cycle, no one knows how the demands for capital and compute will evolve as the broader AI ecosystem matures. That will only become clearer as technology and markets continue to develop. This uncertainty reinforces the importance of remaining vigilant around the types of activity we finance and how we manage risk as we support our clients.
We are highly selective about the risk we underwrite and the capital we commit, particularly as client financing needs become larger and more complex. Beyond these financial risks, we also recognize the broader concerns around the accelerating pace of AI technology and the unchecked advancement of frontier models. Like other transformative technologies, AI presents significant opportunities, but also significant risks that must be carefully assessed and managed. However, the choice is not between halting progress and moving forward without guardrails. We must enable innovation and also demand responsibility. The experience of the financial services industry has demonstrated the value of rigorous testing, independent review and continuous monitoring, and clear human accountability. These principles, applied in ways that reflect the unique characteristics of AI, can help build the trust and confidence needed to deploy the technology responsibly at scale while companies, developers, and governments work together to establish appropriate safeguards.
All in, we continue to see meaningful opportunities ahead of us. We are incredibly well positioned given our relentless focus on serving our clients while remaining vigilant to emerging risks in this dynamic environment. Our culture of teamwork, excellence, and partnership remains a key differentiator that has enabled us to adapt, innovate, and execute through a range of environments. I've never been more confident in our ability to create long-term value for shareholders by making the right investments to grow the firm and generate sustainable earnings growth. With that, I'll turn it over to Denis to walk through our financial results in more detail.
Thank you, David. Good morning, everyone. Let's start with our results on page one of the presentation. In the third quarter, we generated net revenues of $18.7 billion, earnings per share of $17.01, which drove a quarterly ROE of 18.7% and ROTE of 20.5%. Turning to segment performance starting on page three. Global banking and markets revenues were $13.5 billion in the third quarter, our second highest quarterly revenues, contributing to a segment ROE of 23.5% for the year-to-date. Moving to page four, advisory revenues of $1.7 billion reached a quarterly record and rose 18% year-over-year, driven by higher volumes. For the year-to-date, we maintained our number one league table position for announced and completed M&A volumes. In equity underwriting, revenues of $666 million rose 43% year-over-year on strong IPO and secondary offerings activity.
In debt underwriting, revenues were $904 million, up 15% year-over-year, driven primarily by stronger investment grade activity. year-to-date, we ranked number one in equity underwriting, number two in leveraged loans, and number three in high yield debt underwriting. Even amid very strong accruals in the quarter, our investment banking backlog remains very robust, as strong revenue realizations and advisory were largely offset by solid replenishment and equity underwriting. year-to-date, sponsor share of announced M&A remains below historical averages, presenting further upside when activity picks up. FICC net revenues were essentially unchanged year-over-year. Intermediation revenues declined 7%, as lower results in mortgages, rates, and credit were largely offset by strong performance in currencies and commodities. Financing revenues increased 14% to their second highest level, driven by strength in mortgages and structured financing.
Equities net revenues were $6.4 billion, up 72% year-over-year, representing our second-best quarter, driven by strong performance in both intermediation and financing. Equities intermediation revenues rose 52% to their second highest level, driven by strength in derivatives. Equities financing revenues rose 96% to a record driven primarily by elevated average prime balances and strong activity across Asia. Demand for equities financing continues to exceed available industry capacity, supporting attractive pricing and allowing us to remain selective in deploying resources. Following significant multi-year investment, our focus is increasingly on optimizing a diversified global portfolio, guided by our risk management framework, client relationships, and returns. More broadly, we continue to see structural tailwinds for the growth in tradable assets and the increasing financing needs associated with those assets, which have helped to support sustained industry growth and equities financing over time.
Year-to-date, total financing revenues of $12.7 billion were a record and represented over 40% of combined FICC and equities revenues. As David mentioned, growth in financing revenues has contributed to greater durability in FICC and equities, and is underpinned by a robust risk framework that includes diversified exposures, limits, concentration management, and comprehensive stress testing. Let's turn to page five. Asset and wealth management revenues were $5.1 billion, up 14% year-over-year. Management and other fees rose 22% year-over-year to a record $3.6 billion, reflecting the impact of higher average assets under supervision. Incentive fees were $587 million. Through our ultra high net worth wealth management franchise, we provided clients early access to a high growth investment opportunity and recognized incentive fees following the company's IPO. Based on our current outlook, we expect incentive fees to remain elevated in the fourth quarter.
Private banking and lending revenues were $827 million, up 20% sequentially, driven by higher net interest from consumer deposits. Loan balances were up 6% to $51 billion. Investments revenues were $50 million, given the timing of certain monetizations following a strong second quarter and certain markdowns. Now moving to page six. Total assets under supervision ended the quarter at a record $4.1 trillion, supported by $97 billion of long-term fee-based net inflows, marking our 35th consecutive quarter of long-term fee-based net inflows. Wealth management client assets reached another record of $2.1 trillion, with $47 billion of long-term net inflows. Turning to page seven. Alternative assets under supervision totaled $491 billion at the end of the third quarter, driving $860 million in management and other fees, the best performance since our 2020 Investor Day.
Gross third-party alternatives fundraising was $37 billion for the quarter and $122 billion for the year-to-date. On page nine, firm wide net interest income was $3.8 billion. Our total loan portfolio increased 6% from the prior quarter to $276 billion, reflecting broad-based growth across the portfolio. Our provision for credit losses was $368 million. While overall credit quality and portfolio performance have remained strong, our provisions reflected certain impairments across our portfolio as well as overall growth in lending. Turning to expenses on page 10. Total operating expenses were $11.3 billion for the quarter. For the year-to-date, total operating expenses were $33.4 billion for an efficiency ratio of 59.4%, improving 270 basis points from the prior year and in line with our target. Our year-to-date compensation ratio net of provisions was reduced to 30%.
We remain committed to paying for performance and delivering operating leverage for shareholders. Quarterly non-compensation expenses were $6.2 billion, 30% higher year-over-year, driven largely by higher transaction-based expenses. Additionally, given the strong pull-through of incentive fees this quarter, we made a tax efficient charitable contribution of approximately $450 million as part of a planned acceleration of our philanthropic efforts. We also expect to make a meaningful contribution in the fourth quarter. Together, these actions will pull forward at least five years of planned charitable giving. The impact of our charitable contributions on quarterly EPS was approximately $1, while the impact on ROE and ROTE was approximately 1.1 percentage points each. Our effective tax rate for the year-to-date was 20.4%, and for the full year, we continue to expect an effective tax rate of approximately 20%.
Now on to slide 11. Our common equity Tier One ratio was 12.4% at the end of the third quarter under the standardized approach, 100 basis points above our current capital requirement of 11.4%. Regarding recent regulatory developments, we welcome the Federal Reserve's rule finalization to enhance the transparency and accountability of the CCAR stress test and reduce the volatility of capital requirements. We also recognize the progress of the Basel III endgame and G-SIB surcharge proposals and are hopeful for finalization by the end of the year. Collectively, these developments represent meaningful progress towards a more balanced and risk-sensitive regulatory capital framework that preserves the strength and resilience of the banking system. As the rules are finalized, we support appropriately calibrated requirements that are aligned with the risks firms actually take and look forward to the timely completion of these reforms.
We expect regulatory focus to soon shift towards liquidity regulation reform. We currently have over $570 billion in average global core liquid assets, representing approximately 25% of our total assets, and our liquidity coverage ratio is among the highest in our peer group. In the quarter, we repurchased $3 billion of our common stock and paid $1.5 billion in dividends. We continue to have significant capacity to deploy capital prudently in service of clients while maintaining an appropriate buffer.
In conclusion, our third quarter performance reflects the strength of our client franchise, which has been bolstered by years of strategic execution. We've built market-leading franchises, deep relationships, and a higher and more durable revenue base. We remain focused on delivering strong returns while continuing to invest in our people, technology, and client franchises to drive long-term earnings growth and deliver for our shareholders. With that, we'll now open up the line for questions.
Thank you. Please stand by as we assemble our queue. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press star then two on your telephone keypad. If you're asking a question and are on a hands-free unit or a speakerphone, we would like to ask that you use your handset when asking your question. Please limit yourself to one question and one follow-up question. We'll take our first question from Glenn Schorr with Evercore ISI.
Hi there. Thank you. First one on trading and markets. The results are nothing short of awesome. There's a short-term and long-term question I have. The short term is just simple. Is there anything unique in the quarter like related situational awareness or anything like that would contribute to the quarter such that we don't over model in the fourth quarter? The bigger picture question I want to ask you is, there's so many developments going on, tokenization, agentic trading, DeFi vaults, prediction markets. All these theoretically would nip at the core of your great markets business, but obviously you're not standing still. So maybe you could talk about where you're making investments and how you see some of those things, how we should think about that in conjunction with your markets platform. Thank you.
Sure. Thanks, Glenn, and good morning. On the first point, I don't see anything that I would call out. Denis, do you?
Nope. I agree with that.
Yeah. Don't see anything I'd call out just on the first thing, just to put that aside. On your second question, obviously we've seen market structure evolve with technological advancements over long periods of time. We've talked about that for a long time, and as a leading market maker and risk intermediary, we have to continue to invest in technologies, infrastructure, capabilities to make sure we're supporting our clients at the cutting edge, and I think we continue to do that. I know you'll remember, Glenn, that it was not too long ago that people were concerned about electronification and equities trading and its impact on our business. But as we sit here today, the opportunity set for us is greater than what anyone could have contemplated when you look at our equity revenues and the way we adjusted and the way the business has evolved.
Today, tokenization is obviously an important trend. We see it across asset classes. We were publicly supportive of CLARITY passing. It wasn't perfect, but we thought it would be good to give the market more clarity, no pun intended, and ensure investor protection. In the absence of that, we're already seeing agencies take steps to provide clearer rules for market, and we're very engaged in those dialogues. We continue to invest and closely monitor the developments, both for opportunities but also for risks. The developments are obviously creating more products, greater activity, potentially new clients, broader distribution channels. Naturally, when you look at these things, they expand the TAM for our business, and that's one of the things that's interesting and exciting. At the same point, we remain very focused on ensuring that we're well-positioned to serve our clients as these markets evolve.
We've been investing in companies in the digital asset border market infrastructure space for years, and remain very focused on that. We've been building capabilities such as the GS DAP, where we were early in building our own rails for digital assets. We've tokenized bonds. We have a number of money market funds that are tokenized, real estate for certain clients, and so we've been focused on trying to be at the edge of some of those activities, although I'd say broadly, those activities are very small at this point. We're participating in a range of market developments. In July, we participated in the launch of DTCC's tokenization service, and we're now actively assessing scalable use cases that we could put within it.
We expect over time, the underlying technology can drive greater efficiency, automation, streamline processes, reduce costs, take away friction, improve liquidity across asset classes. We are going to remain focused on this. I think you are right to raise it as something that requires attention, but I would say the activity so far is small and at the margin. We are going to continue to have real resources thinking about how these changes can evolve over time. I think it is one of the reasons when you think about, for example, electronification, we have managed to manage disruption or change in the equity business so well. We use that as a little bit of a guideline. I hope that is some helpful color.
Yeah, you have not put any thought into it. No, I am kidding. Thank you. That was very helpful. I have covered you guys since, I guess the IPO. I have seen some transitions in management, and Goldman just gets stronger each step of the way. This one seems to be being managed pretty methodically. There were just some articles recently that talked about an acceleration. I do not know, David, if you want to address any of that just to keep the record straight. I appreciate it. Thanks.
No, sure. I appreciate the question because some of the articles, the articles create noise. I will just start with, Glenn, I am super pleased with the progress the firm has made since we laid out our strategy at our Investor Day. The execution, this team has worked to really grow the firm significantly, and I think we have really made it increasingly durable. I have to say, at the point we are at now where we see the benefits of the effort that the broad team has made, I am really enjoying the job. More importantly, as a team, we are super excited about what is in front of us in the coming years and how we can continue to grow the franchise and really accelerate the earnings potential of the firm. I just want to be clear, there is no succession transition or timeline underway at Goldman Sachs.
The Board and I are singularly focused on our strategy to grow the firm and continue to serve our clients with excellence.
Thank you. We will take our next question from Erika Najarian with UBS.
Thank you. David, you answered this question in your prepared remarks, so maybe the more nuanced way to ask it is, there has been a lot of fears in the investor community that the bond market rout globally was going to have a chilling effect on activity levels. Given how you framed the pipeline, maybe talk about how discussions have evolved or take into account higher long-end rates and if that is a factor. Just a compound question because I have to be on TV in five seconds. If we think about the capital consumption in the fourth quarter, clearly, capital came in 50 basis points lighter. You still have plenty of excess. JP Morgan mentioned that the fourth quarter should be super active in trading and should not have a seasonal slowdown. How should we think about capital consumption going forward? Thank you.
Well, just quickly on capital consumption. We talk about running with a 50- 100 basis points buffer. We are at 100 basis points buffer. The firm has very good earnings momentum, so we generate capital. We feel comfortable with the fact that we have adequate capital to deploy in an active quarter in the fourth quarter. We feel like we are managing that well. We continue to feel very nimble about our ability to manage our capital allocation effectively, clients first, then when we cannot deploy, back to shareholders.
On the first topic, just around rates and the effect on activity, we did see in the quarter a very meaningful move in rates. I think from the beginning of July to now, we have seen a 75 basis points move on the 10-year, approximately, do not hold me exactly to that, but a 75 basis points move on the 10-year.
But I think one of the things that is lost is that historical perspective on term Treasury premium. Because we have really operated since the financial crisis in an environment where rates are fundamentally low. As a 64-year-old guy, I kind of look back at the last 64 years, and a 5% 10-year Treasury does not scare me in terms of an operating environment. The overwhelming periods of time in my life, the 10-year Treasury has been higher than the level that it is in. We can have very, very effective capital markets with that. What creates headwind for markets is when you have very, very abrupt moves. Yes, we had a meaningful move in the quarter. There were probably some days when it was abrupt, but you have a lot of other things going on that are very, very important. We have a very, very strong underlying economy.
The economy continues to be very, very resilient despite some of the headwinds. We have an extraordinary tech super cycle. I think we have a regulatory environment that is really encouraging strategic activity to continue to grow scale. You put these things all together and you balance it, and I think it's a pretty good environment. I know people looked at the quarter and felt that it felt a little different than it did in the second quarter, and I think that's fair. I would say that if I go back to the end of May or June, I would call it like a top decile environment for kind of market activity and capital markets activity. But now we're in a top quartile environment, and that's still really, really good when you think about long periods of time. We feel quite good about the activity levels.
Obviously, if there was a lot more interest rate volatility, that could create headwinds, but we'll watch markets carefully. At the moment, as we look at activity levels, they feel good.
Great. Thank you so much.
We will take our next question from Ebrahim Poonawala with Bank of America.
Hey, good morning.
Good morning.
I guess first question, David, Hock Tan from Broadcom, he was speaking overnight, and he kind of questioned the sustainability of the AI CapEx financing. And you are obviously part of the group with Jensen during the quarter. One, do you share that concern that the real choke point for AI CapEx will be financing, especially given rates moving higher, it is unclear what the returns look like. Frame that for us, given you probably have one of the best visibilities on what the appetite looks like. Thanks
I think, Christian, it is a very, very good question. Ebrahim, I am sorry. Ebrahim.
[crosstalk]
It's a very, very-- y eah, I apologize. I'm looking at a screen here.
I've been called a lot worse in life, so it's okay.
Okay. I apologize, because Christian's next, and I looked at the screen quickly. I apologize. Ebrahim, it's a really good question, and I'm probably going to disappoint you in my answer, which is I don't know, and nobody knows. What I would say, and you saw it in our remarks, we are extremely conscious of the fact that the expectations for the quantum of financing that's necessary to build out the data center infrastructure in the United States, based on what people are predicting, is quite significant. Over time, there is risk. There is risk to pressure on crowding out the size of scale. Not every project's going to be received as well.
We feel very lucky, and I said this in the prepared remarks, we sit in the center of that ecosystem, but we also recognize we have an extraordinary obligation to be very disciplined about what we underwrite. I think generalized comments about the direction of travel and what will happen, I think we've got to be very cautious about that. There is going to be a lot of financing to do, and we're going to be in the middle of that. It may be over time, as the financing needs grow, that there's pressure on rates, and that will affect the returns and the viability of certain projects. It's our job as an intermediary, as an asset manager, as a capital provider, to sort through that and make prudent decisions. I think we're very good at that, and we will.
But one thing's for clear, there's a lot of demand for compute at the moment. The supply has not come into balance. More is going to get built. More financing is going to be necessary. There will be a point in time when this recalibrates, resets, for sure. When that does happen, of course, there'll be some bumps. But it's very, very hard to predict that. I think broad assertions that any of us know the direction of travel, how the technology will be evolved, how it will be deployed, that's just an unknown we have to live with. But it's an exciting time because there's going to be a lot of really interesting things to do around that.
Got it. I guess one other question. Improving and durable earnings have been a big focus for you. Help me solve for this. When we look at the growth in prime and equities financing, you could make the argument that it's adding to the cyclicality of the business if there's de-leveraging among hedge funds, et cetera. Sure, I'm not talking about quarter-to-quarter volatility, but how should we think about equity financing actually making these earnings more durable versus adding to the cyclicality? How would you sort of think through that, if you could help us?
Yeah, sure, Christian. Ebrahim, again.
You must love Christian, I guess.
No, I actually love Ebrahim and Christian. I love everybody. I think the way to think about this is we all have to. This is the way we think about it running the firm. You have to step out of quarter- to- quarter. None of us here, as we risk manage in our prime business, are confused. Equity markets go up, equity markets come down. When equity markets come down, there is a deleveraging, and the size of the prime business, because of the needs that our clients have to be financed with a smaller equity market, a smaller market cap, there is going to be some cyclicality to that.
However, if you step back and you get out of quarter-to-quarter movements and you fundamentally believe in growth in the world, and therefore GDP growth in the world, and therefore growth in market cap and technology innovation over any three-year to five-year period, the durability of the growth of that business at some baseline is going to be very attractive for Goldman Sachs. When you step out of the quarter and you think over three, five, seven years, you have really seen this.
Look, we have grown our revenues over the last five years since 2022 by 11% compounded on the top line. I do not believe we are going to grow our revenues by 11% compounded on the top line for the next five years. There will be stops and starts as equity markets move around. But what we are trying to prove out is that the durable base is much bigger. It is a much more diverse business, and fundamentally, it is very correlated to GDP growth and equity market cap growth over time. If we stop looking quarter-to-quarter and start looking at three-year to five-year periods and look at the earnings growth that is driven, you get a very, very constructive result.
Thank you. We will take our next question from Christian Bolu with Autonomous Research.
Good morning, David. Good morning, Denis. Feel free to call me Ebrahim, too, I equal--
I was going to. I was going to call you Ebrahim. I was going to call you Ibrahim just to level the playing field.
Yes. All right. I guess first one, David. Just on the IB cycle here. I would love to get some color on where you think we are in the cycle. The macro seems to be marginally more challenging, higher rates. We have seen a bunch of IPOs get pulled. We probably get a change in the political climate post U.S. midterm elections. Your backlogs seem impressive, but they did pull back a little bit. Just give me a sense of where you think we are in the cycle. Have we peaked or is there more to go?
I know everybody wants to call the peak. It is hard to call the peak, but let us just step back. I want to go back to something I said just a little bit earlier. I still think for capital markets activity, it is a top quartile environment. For strategic M&A, there is an enormous amount of dialogue that continues. Our backlog is incredibly robust. It is fair to say that we had enormous accruals in the quarter, but if you listen to our prepared remarks, we were very forward about how robust the backlog remains.
Capital markets activity is still good. I think one of the things that gets lost, there are obviously a handful of IPOs that did not move forward, but when you look at ECM revenues for the quarter and for the last few quarters, they are running meaningfully above both five-year and 10-year averages. That is a good environment.
Five-year and 10-year averages would be a 50% kind of capital markets environment. Running meaningfully above five and 10-year averages is a better environment. I think we're still in a very good capital markets environment. I think one of the things that happened with a handful of the IPOs, when people do IPOs, they make a decision months in advance to move forward, and they have a discussion around what the valuation expectation is. The investors have an expectation. IPOs that came in September were really the result of conversations in May and June around valuation expectations. Things got a little bit softer in September. The IPO market was wide open. It's just if you expected a valuation and you got something 10%-15% less, you might choose not to go forward, you might choose to wait.
The IPO market is still in pretty good shape. I'd say capital markets activities are strong. There's no question the overall macro environment is a little bit more complicated. The rates environment, a little bit more complicated. The activity levels that we're seeing are still pretty good, but we'll obviously have to watch through the quarter. I think all the technology innovation and the AI infrastructure activity is a real good ballast for capital markets activity on a go-forward basis. That doesn't mean there won't be bumps in the quarter ahead. But when I look, we're certainly operating in a very good environment for capital markets and investment banking activity at the moment.
Okay. Very helpful. Maybe just on balance sheet and capital management. Clearly, you're seeing tremendous balance sheet demand as evidenced by the robust growth in your financing business. I am a little bit surprised that you are still buying back a ton of stock at 3x tangible, especially as your SLR is lower than peers. Maybe just talk through how we should think about capital management priorities as you move into 2027.
Ebrahim, thank you. Thank you for the question. Times two.
Right.
So--
That's a good CFO.
So look, this is all taken against the backdrop that David's outlined. We're optimistic about the opportunity set. We made decisions over the course of this year following some of the regulatory capital relief to expand our deployment into the client franchise. We also happened to buy a bunch of stock as well. We were generating significant earnings that enabled us both to buy back the stock, buy down our share count, give us capacity to continuously and systematically buy down our shares outstanding over time. Gives us more capacity on the follow, but we were also able to make decisions to fuel the client franchise, which ultimately is delivering the results that we're talking about here in the third quarter. I think as we head forward into 2027, I think you should expect our approach to be similar.
We will deploy into the franchise as a matter of priority. We do expect to continue to invest in the sustainable growth of our dividend. It's obviously up 25% year-over-year. It's now at $5 a share. It was $4 a year ago. Five years ago, it was $2 a share. So we've been consistently investing in the growth of our dividend. That remains important. Then obviously with excess, we'll return it to shareholders and make sure we have the right buffer to operate the firm. So I think it's a consistent approach to our deployment, including into 2027.
We will take our next question from Mike Mayo with Wells Fargo Securities.
Hi. I guess there's been more talk about a headwind to what you described as an extraordinary tech super cycle as it relates to power, labor, rates. CapEx has gone from billions to trillions, the climate. Is funding a constraint for this tech super cycle, and is your conviction as strong as it was, say, three or six months ago? On the positive side, you talk about the growth in tradable assets globally. You're expanding in Asia. What has been that growth? What are your numbers around that? Thank you.
So on the first part, Mike, you're talking about just enough capital in the markets to fund the growth of all this technology expansion? Or were you talking about our funding? I assume you're talking about just general capital availability to fund the significant AI infrastructure growth?
Yeah. If bond markets go on strike or if rates go up too much, or just the political hiccups, the pushback against data centers.
Yeah.
I know it's not a straight line up, but you still describe it as a tech super cycle. Do you think this is as strong a tech super cycle as you did six months ago, for example, given just some of the headlines that we see and the reaction from the technology companies?
Yeah, I do think it's a very strong AI technology super cycle, Mike, and there's no way to step away from that. The things that you highlight, obviously if there are other factors that create significant interest rate volatility and push rates higher, that will have an impact. On the pace of build-out and what projects get done and how they get done. If there's more geopolitical volatility in the world, that can have an impact. Localized political volatility around data centers. We've got an election coming up. It'll be interesting to see. Obviously, there's a lot of political discussion coming into an election, but then you also have to see how states and localities act coming out of elections. All these things can create volatility, and there's uncertainty around them. So no one knows the exact line of travel. But at its base, this technology is real.
It's going to accelerate in terms of its deployment. There's going to be infrastructure built around it that's going to be quite significant. Hopefully, also, and I think this is the case, there's going to be guardrails and governance processes that help build trust around it. There's a lot of responsibility that goes to enterprises that are deploying it around making sure it's deployed correctly. But all of that is generally constructive for our business. Now, I can tell you lots of things that can go wrong and slow it down. But there's uncertainty around that, but that's kind of part of our job and the market's job is to kind of intermediate that and decide, as time goes on, the trajectory of that line. But this is real and it's significant, and it's not going away, in my opinion.
Mike, I think on the second part of your question, as the world continues to expand, as we expand our opportunity set in Asia, something we've been strategically getting after for a number of years, you're seeing some of the results of that investment and the expansion of clients and markets and places that we can actually trade and finance different assets. If you look in our earnings release, you can see the geographic mix of our revenues. You could look back a year, you could look at the second, you could look at the year-over-year, you could look at the sequential for the firm, and there's very meaningful change in Asia's representation of aggregate firm-wide revenues.
I think it's fair to say a lot of that change in the geographic mix of revenues in the firm is being driven by equities activity, equity financing activity. So those numbers give you a decent picture for the expansion of that opportunity set.
And then completely separately, there are a lot of articles, headlines written about you, David, and succession. Clearly it was nothing that came out from Goldman Sachs, but what are your plans for staying around at Goldman as CEO?
I think you might not have been on earlier when Glenn Schorr asked that question, Mike. The way I answered, I will just repeat what I said. I talked a little bit about the work we have done, the progress we have made, how much I am enjoying it, and also the excitement of the leadership team we have about the years ahead. I said, to be clear, there is no succession transition or timeline underway at Goldman Sachs. The board and I are singly focused on growing the firm, growing our earnings, serving our clients. So that is what I said earlier on the call.
We will take our next question from Steven Chubak with Wolfe Research.
Hi, good morning, and thanks for taking my questions. David, wanted to double-click a little bit further into the revenue opportunity tied to the financing of the digital infrastructure build-out. Your firm is actually uniquely positioned to underwrite financing activity both in the private IG market as well as the public debt market. As we get deeper into the AI CapEx cycle, wanted to get your perspective as to how you see activity migrating from the public to private markets, how you are positioned competitively to compete in that private IG space, and how does that impact some of the revenue considerations or economics if that activity does in fact migrate away from the public debt space and into the private sphere?
Yeah, I'll make a couple of comments, and Denis might have a couple of comments here too. But again, I know everyone wants an absolutely clear answer on the direction of travel of all of this. The capital demands are significant, and it's going to require significant capital deployment from the public markets, both equity and debt, and from the private markets, both equity and debt. And we're seeing that. I think one of the things that makes Goldman Sachs so unique is we're the only firm that sits kind of at the epicenter of having an ability to advise on these projects and the financings and how they should come together. An ability to be an originator on a structure of these transactions and distribute them to other institutional sources of capital.
In addition, have a very broad asset management platform that includes both public and private pools of capital that can be coordinated into these transactions. And there's nobody else that has that positioning. So we feel as a firm that we're seeing a lot, and we sit in a very privileged place in the ecosystem. There's a significant amount of activity. It's different for different entities. It depends on who the customers and the offtakes are in a lot of the projects, which has a significant impact on the financing rates as to where you can go. There's a big difference from something that's really generated to serve a hyperscaler versus some of the neo clouds. So all of this goes into the equation. But we feel very well positioned to bring the full range of services and participate actively.
And we still see an enormous amount of activity. I mean, Denis, you want to add to that at all?
No, I think it's well said. The only thing I would add is if you step back and you also think about our banking franchise, the coverage footprint that we have, this cycle is different from prior cycles in that the largest, biggest companies driving the cycle have significant capacity to use free cash flow to finance this. So there's lots of discussions with how you advise those large companies themselves, how much debt they should issue, how much equity they should issue, what's their rating appetite, what are the structures of the financing facilities. So you have to start with those people that are actually driving the investment super cycle, then you move into the public and private debt and equity markets. We obviously, through Capital Solutions, have the capacity to underwrite and distribute. To also put certain types of financing structures on our own balance sheet.
We have been growing our AWM business, our private IG business, as you referenced, quite substantially. That also can participate in the overall growth. If you think about the entire ecosystem, the supply chain is super complicated. There are tremendous number of different companies that operate, and you can finance the different companies at each point in the supply chain across different markets around the world. Given the scale of capabilities that we have, we just feel that we are well-positioned to assist all across the supply chain in driving growth of the investment cycle.
No, appreciate really all that detail and the perspective that you offered. Maybe just a quick follow-up on the SLR. Given financing activity is much more leverage intensive, you guys have obviously seen outsized gains on the financing side. Speak to where you are comfortable running under the SLR constraint while supporting continued balance sheet expansion. Specifically your appetite to grow in more nascent financing areas such as tax aware strategies, just given your leading position in wealth in the RIA custody space would be a natural extension of your current financing capabilities.
Sure. So you have obviously seen the change in how we have run our SLR ratio on a year-to-date basis. I think it is fair to say that the biggest delta, the largest sort of balance sheet extension, is behind us. We are now migrating to a zone where we run a buffer in SLR much like we run in CET1 ratio. So we feel like we have the requisite capital we need to support the growth in client activity as we head into the fourth quarter. But I would not expect a significant movement from here. In terms of other strategies that we have across the overall AWM franchise, we are exploring and working on a number of those different strategies that you referenced.
We will take our next question from Manan Gosalia with Morgan Stanley.
Hi, good morning. Earlier in the call, you spoke about the year-to-date sponsor share for announced M&A being below the historical average. I guess, what's your outlook for that business, given the uptick in rates? Are you seeing any pullback, any reluctance for some of those deals to come through into the market?
Yeah, I appreciate the question, Manan. The sponsors have been slow to monetize and turn over the capital portfolios from the 2020 and 2021 vintages. I think we all feel we would've seen more activity by now. I know there's a lot of questions around the fact in a higher rate environment, is that more constraining? I think the bigger constraint is that a lot of this stuff is still marked higher than where it can be monetized in the market, and the sponsors are taking the optionality to wait longer because that's the way the incentive system works. They obviously have tools such as continuation funds, and other vehicles to extend life of funds, and so they're taking advantage of those. This will come out, though. This activity will come.
I think the thing I'd look at, I'd look at the M&A levels and just recognizing the capital markets levels and just recognize it's been very light on sponsor activity. That sponsor activity's going to come, and when it comes, that'll be a tailwind. It has been slower than we would've expected at this point. I'm not overly concerned with how the interest rate environment affects it in the short term.
Got it. Are the midterms factoring into your conversations with clients at all? Are clients waiting on the sidelines to get more clarity on that? Or maybe on the flip side, if there's a greater sense of urgency to get deals done?
I don't sense that people are sitting on the sidelines because of the midterms. I think from a strategic M&A perspective, the window is we have an administration for two and a quarter more years. This is an administration where strategically to achieve scale, there's a general point of view that unlike in the prior administration where whatever the question was the answer was no. In this administration, whatever the question is the answer is very significant maybe. Strategically, companies are very front-footed, and I think they feel comfortable that they've got a window regardless of the midterms. They've kind of got a window that presses through the administration. I think people are watching the midterms carefully to see what happens and what that means for activity in government over the course of the next couple of years.
I don't see it at the moment affecting activity significantly.
We will take our next question from Brennan Hawken with BMO.
Good morning. Thanks for taking my question. I had one on financing. You've spoken to both pricing and strength in Asia. You said that there's no one-timers there. The third quarter was perceived as a bit of a degrossing period. So curious whether or not you saw that, and is it possible to break down some of the growth that you've seen in those trading revenues between how much is tied to average balances growing versus the pricing benefits that you've highlighted? Thanks.
Brennan, I appreciate the question. The growth rate for financing in particular on a sequential basis was about 3%. I think there was deleveraging in the quarter. I think there was some disruption over the course of the quarter, and the trajectory did not sustain substantial growth. It is still very healthy. As we pointed out in the prepared remarks, it does remain an environment that sort of supply of financing constrained. One of the levers that we have in terms of driving sustainable growth in that activity is as there can be pullbacks, we can assess expanding the funnel of activity that we take on board with existing clients and/or new clients as a bit of a valve as aggregate market levels adjust. I think most of what would explain the sequential performance does relate to the overall backdrop of the market.
There was not significant change in the composition of the book away from that.
Great. Okay. Thanks for that, Denis. You spoke to the year-to-date comp ratio, 30%. Is that the best way we should be thinking about your expectation for the full year? A few investors noted this morning about the strong performance on the comp ratio. Is there something to do with revenue mix? Equities revenue has been really, really strong. That is generally considered a lower comp ratio business. Has it been like business mix that has helped the comp ratio, or are you just seeing lower competition for talent? Thanks for taking my questions.
Sure. I would say there are a couple of things in terms of how we think about the comp ratio. First, it is our best estimate at the moment for what we expect for the year, but I would say that we are applying a strategic lens to it, and your question does get after this. As we look at ways that we can invest to grow the firm, grow the earnings of the firm, scale the firm, we are building durable platform-connected types of businesses, and over time, we should not have the same degree of headcount-related expenses that we might have historically to grow and scale the firm. Certain of the more durable activities, including the financing activities, we are using a lot of the firm's financial resources and risk appetite to drive that activity.
There can be favorable compensation ratio benefits with respect to the growth of those activities. I would not say that we're seeing any diminution in terms of the market for talent. Frankly, quite the opposite. I think for the very, very best people in this environment, business professionals, engineering professionals across the firm, there's a very, very strong bid for the very, very best people, and we make sure that we're in a position to compensate them appropriately. But we are focused over the longer term on sustainably delivering operating leverage to our shareholders as we grow the firm. This is one step in that direction.
We will take our next question from Dan Fannon with Jefferies.
Thanks. Good morning. So one more on expenses, Denis, and shifting to non-comp, obviously excluding the charitable numbers in this quarter and I think next quarter, as you highlighted. Could you just talk about the growth rate or outlook for non-comp expense as you think about the AI benefits you might be seeing in other areas investment that could be growing or shrinking as we look ahead?
Sure. First and foremost, you can see it in the numbers, both aggregate and the deltas. By far, the biggest component is transaction-based expenses. That story remains the same. For so long as we continue to see strong levels of client activity, particularly in equities and particularly in Asia, we'd expect that we'll continue to see growth in the transaction-based expenses. You're right. By the end of this year, based on our current expectations, we'll have made contributions to support go-forward charitable giving that hopefully should carry us through about five years or so on our best estimate. So you're unlikely to see that in the future periods as a result. The other area of strategic growth is across technology, generally speaking, in comms and tech. We're going to continue to make sure that our people have access to the cutting-edge technology.
We're making investments in our data infrastructure, our migrations to cloud. We're obviously making investments with respect to the models. We're also making talent investments, all to make sure that we can support the firm's scaled growth over time. I would call those out as the areas of focus.
Understood. Just as a follow-up, wealth management organic growth more than accelerated, $47 billion in the quarter in terms of net inflows. Anything one time in there or chunky that you would call out or maybe just talk to the components, whether it was new advisor adds, recruiting, same store sales with existing clients, what was the driver there?
I would not call out a particular one time. I would say that we have now a multi-year sustained investment in expanding our advisor footprint. That's a decision that was made a number of years ago. We continue to ramp up. Advisors continue to expand our geographic footprint and our reach around the world. We continue to have very, very strong investment performance, which is really important. We continue to invest in the overall quality of our people and in terms of the client experience that our clients have with our people. It's a big area of strategic focus for the firm. It is performing substantially ahead of the targets that we put out earlier this year of 5%, but we're very pleased, and it's a huge opportunity for the firm.
We will take our next question from Devin Ryan with Citizens Bank.
Thanks. Good morning, David and Denis. A couple here on asset management, and really on the alts business. It's just been incredibly impressive fundraising. You started the year at a $75 billion-$100 billion target. Now you're kind of targeting $150 billion. Clearly a lot of incremental capital coming in here. Just curious if you could give us a little more color around how much of that is just being kind of opportunistic in the market with some of these themes, like the volatility in private credit, or whether there's something maybe bigger structurally that's been changing around your ability to distribute or even add capacity to that business.
Yeah. I appreciate the question, Devin, but there's nothing opportunistic about it. This is a concerted strategy that started six-plus years ago to really scale the platform. When you look across the platform, it's a scaled platform. We've got managers across a variety of the different categories of private capital raising that have a lot of experience, good performance. We've been very, very good to institutional allocators at customizing solutions that work for them with a long-term view. In addition, we have very, very good demand for these products and services from our ultra-high net worth channel, which is a very, very important component. This has been a strategic decision that we've made real scaled progress on over a period of time that has meaningfully increased our capacity to compete at the highest level in the space. I think we've got good runway.
When you look at private credit, for example, one of the things we've benefited from is we've been in this business for 40 years. Institutional allocators, despite the noise in the media around private credit, as spreads have normalized to more attractive levels, institutional allocators have thought this is a more attractive time in the last three to six months to bring capital into experienced private credit managers, and we've benefited from that. There's nothing opportunistic. This is a long-term strategy to have one of the largest and broadest private alts platforms, and you're seeing the benefit of our scaled position start to come through.
Appreciate that, David. Just a follow-up just on the acquisition front in asset management. Clearly, it's been an area of doing ETFs. Are there any other areas you feel like you're still sub-scale in asset management, or where a few additional capabilities or investments could kind of, like you just said on the alt side, similarly really kind of improve the capacity or make you more relevant with institutional or retail clients? Thanks.
Yeah. There's no question. We still have gaps across the platform. We have a presence across all the variety of private assets broadly, but there's some places where we're not as scaled as we'd like to be. That doesn't mean that we'll make an acquisition in that space because there's got to be fit, there's got to be the right team. But we continue to look for places where we're not scaled, where there are opportunities, both across privates and the public side of our asset management business to increase our scale. I think there'll be other opportunities. I'm not going to call out something specifically. But we're not at scale everywhere, and if we see an opportunity that fits and accelerates our scale position, we're certainly going to consider it.
But always with a very high bar around culture fit and the specific people we're bringing into the firm.
Thank you. We'll take our next question from Gerard Cassidy with RBC.
Hi, David. Hi, Denis. Denis, you touched on in your comments about the provision being higher, that you gave us guidance earlier in the quarter about it being higher. So there's no real surprise. The outlook for credit from your comments still is strong. But can you elaborate a little bit on the marks that you took to drove that provision?
Sure. There's two drivers this quarter that are worth taking note of. One, which is the secondary driver, but yet it's important, which is overall growth in the portfolio. We continue to deploy capital to expand the opportunities to lend to more clients. And frankly, that's an outgrowth of a strategic decision earlier in the year when we found ourselves with more excess capital that we wanted to fuel growth in our overall investment banking coverage suite of relationships. So a component of the provision number is aggregate growth in the portfolio. But it is the case as well that the impairment numbers were elevated. We looked very carefully, as we always do, at the entire complexion of the portfolio.
Our conclusion is they're a highly idiosyncratic to non-correlated set of names, but we had a couple of different names that we ended up taking incremental impairments against in the quarter. We don't think it's necessarily the signal of something else to come. But it was appropriate for those individual names, and so we took the impairments and put it through in the third quarter.
Very good. Then as a follow-up, you talked about it earlier in the year about the leaning into Asia and the success that you've had, and you touched on it again today, the Asian markets and the equity financing when the execution, you guys obviously benefit from. Are there any other opportunities globally where you can lean into new markets and get the benefits that you're seeing similar to what you did with Asia?
I think there are opportunities all over the world where we can continue to lean in. What we found particularly attractive about Asia is that we felt that we were quite under scale, and the opportunity was available with clients on attractive economic and risk terms. And so it was the most attractive place geographically to drive incremental penetration and scale, and that's why we made it a priority. But there are plenty of other places around the world that we could continue to choose to drive incremental growth as well.
Thank you. We'll take our next question from Chris McGratty with KBW.
Oh, great. Thanks for squeezing me in. David, more of a high-level question. Your outperformance on your ROE to targets, maybe a comment or two on your views on how much is cyclical versus structural.
I appreciate the question, Chris. I think a lot of it is we're structurally running the firm as a broader, more durable franchise with higher fundamental returns. I'm not going to speculate on through the cycle as to how the returns balanced out. But what I will say when I go back over the last five years, I remember sitting on this call for multiple years, including as recently as a couple of years ago, when we were very confident that we could get the firm running through our targets through the cycle, and there was a lot of skepticism about that. The reason the returns are significantly elevated is because we've significantly grown the breadth and the base of the firm. We've significantly changed the operational structure and the durability of the firm, and that's led to higher structural returns.
There's a big strategic result of an investment over a long period of time. I will say, at the moment, and I've said it on the call three times, we're in a very good environment. We're in a top quartile environment. Does that flatter what will be the average returns through the cycle? Absolutely. But structurally, the base returns of the firm have been meaningfully uplifted over the last five years.
Perfect. Then second follow-up would be the midterms. I think there's a divided view of whether a divided government is good for activity or perhaps a headwind. Where do you stand on if the futures markets are right about a divided government, how that could play into your capital markets business? Thanks.
First of all, the election doesn't occur for another month, and in politics, a month is an eternity, so we'll see how the election plays out. I'm not a good pundit, nor are the prediction markets or the futures markets a good pundit of exactly what the environment will bring after the election as we head into 2027. So, we'll watch that and be prepared for whatever comes our way.
Thank you. At this time, there are no additional questions. Ladies and gentlemen, this concludes The Goldman Sachs Group third quarter 2026 earnings conference call. Thank you for your participation. You may now disconnect.