Goldman Sachs (GS) Q1 FY26 earnings call: guidance and Q&A

Inquired about the rationale behind the 180 bps drop in CET1, the deposit growth strategy to finance equity financing, and whether the deployment in lending would yield ROEs in line with long-term goals.

Management explained the CET1 drop was due to strategic deployment into client franchises (equities financing, private wealth lending, acquisition financing) and record share buybacks. They confirmed that the deployed capital is generating attractive returns, with GBM's ROE over 22%. Deposit growth supports firm-wide lending activities.

“across our portfolio of activities, we are generating very attractive returns on that incremental amount of lending activity.”

asked by Glenn Schorr · answered by Denis Coleman

Asked for perspective on private credit's impact on sponsor activity and growth outlook, given its growth and recent headlines. Also inquired about AI-driven risks to banking infrastructure and Goldman Sachs' perception of these risks.

David Solomon clarified that direct lending is a smaller part of the overall private credit market, noting that spreads are becoming more lender-friendly and institutional demand is strong. He views a potential credit cycle as an opportunity for Goldman Sachs due to its disciplined approach. On AI, he stated cybersecurity has always been a core focus, and the firm is accelerating investments in resilience and working with partners to harness frontier capabilities.

“I don't -- I think one of the things that's really not getting a lot of attention is if you do have a cycle, what does that look like? And so if you take a very tough cycle in the global financial crisis, the cumulative default rates across the entire leverage lending space... was 10%, recoveries were about 50%, so the cumulative loss was 5% to 6% against coupons of 9% to 10%.”

asked by Ebrahim Poonawala · answered by David Solomon

Sought an update on the M&A pipeline, especially regarding sponsor community activity and the impact of valuation resets and geopolitical events.

David Solomon stated that the M&A environment remains robust, driven by corporates seeking scale amidst technological change, with the backlog remaining extraordinarily strong despite high accruals. While IPO activity slowed due to geopolitical conflict, a full pipeline and resilient equity markets suggest acceleration is likely. He acknowledged increased uncertainty but noted M&A and capital markets have been resilient.

“The backlog really did not move very significantly at all even though we had extraordinary accruals. And so we continue to see significant activity on the M&A front.”

asked by L. Erika Penala · answered by David Solomon

Asked about the drivers of the increase in Provision for Credit Losses (PCL) in Global Banking & Markets and whether there's a difference in engagement between corporates and other investors.

Denis Coleman attributed the PCL build to loan growth, single-name impairments (not thematic), and adjustments for the overall operating environment. David Solomon noted that both corporates and investors are highly engaged, with corporates focused on long-term scale and consolidation opportunities, and no decline in overall engagement despite short-term macro noise.

“I think people are very engaged, okay, across the franchise. Corporates, investors, very, very engaged.”

asked by Michael Mayo · answered by Denis Coleman

Asked about the trajectory of non-compensation expenses given infrastructure investments and the timing for reaching the 60% efficiency goal. Also inquired about preliminary guidance on the Fed's capital proposal, including RWA, G-SIB, and double counting.

Denis Coleman explained that higher non-comp expenses were largely transaction-based due to robust activity. The firm is accelerating cloud migration and data investments for long-term efficiency while cutting costs elsewhere, remaining focused on the 60% efficiency ratio. On capital, he expressed encouragement about the Basel III reproposals, particularly regarding double counting and G-SIB, and stated the 12.5% CET1 ratio provides a prudent buffer.

“We start the second quarter at 12.5% from a CET1 perspective, 110 basis points of cushion, which basically at the, call it, the wide end or just outside our typical operating range, and we think that's an appropriate level.”

asked by Steven Chubak · answered by Denis Coleman

Asked about the impact of valuation resets and tighter financing on sponsor activity and the proportion of FICC financing tied to direct lending counterparts.

David Solomon noted that while private equity sponsor activity has been slower, it's a small part of the overall diversified GBM business, which still had a record quarter. He expects sponsor activity to accelerate eventually. Denis Coleman clarified that FICC financing is diversified across underlying asset classes, not concentrated in direct lending, and has historically shown zero life-to-date realized losses (excluding direct CRE) due to rigorous underwriting and collateral protection.

“if we look back over the course of history on our FICC financing activities, our life-to-date realized losses, if you exclude some direct commercial real estate, life-to-date realized losses are 0.”

asked by Brennan Hawken · answered by Denis Coleman

Questioned the durability of strong equity results, distinguishing between extraordinary and sustainable drivers, and asked about the softness in FICC rates and mortgages.

Denis Coleman attributed strong equity results to expanding market caps, increased trading activity, improved market share, and strategic capital deployment, noting consistent client demand for financing. David Solomon added that FICC's $4 billion revenue was the tenth best ever, reflecting a more diversified business. Denis explained that softness in rates and mortgages was due to a tougher market-making backdrop, while VAR increases were driven by higher volatility in rates and commodities.

“FICC performance still has to be put in context, it was the tenth best FICC quarter ever out of 100 and some-odd quarters.”

asked by Saul Martinez · answered by David Solomon