Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: To get us started, we have here on set exclusively
Speaker 2: with US David Solomon, chairman and CEO of Goldman Sachs.
Speaker 2: Good morning, very nice to see you.
Speaker 3: Good morning, good to see you. I'm glad to be here.
Speaker 3: It's good to be back in oncome.
Speaker 4: Very good conditions.
Speaker 2: We're in inequity, bool market mag seven and everything else.
Speaker 2: We've had this historic meeting last week between the two
Speaker 2: presidents US in China. What do you what do you
Speaker 2: make of the state of player right now? Are we
Speaker 2: in a much better position than we were at the
Speaker 2: start of the year.
Speaker 3: Well, it seems like the meeting was constructive. I'm I'm
Speaker 3: watching the news the same way you're all watching the news.
Speaker 3: I think at the moment, you know, a de escalation
Speaker 3: is a good thing, but there's obviously a lot of
Speaker 3: work to do to really arrive at a real stable
Speaker 3: deal that can endure, you know, over a period of time.
Speaker 3: I'm encouraged by the prospect of a potential visit from
Speaker 3: the US President that was telegraphed in the fall. But
Speaker 3: for the moment, you know, I did not think the
Speaker 3: escalation on either side was constructive.
Speaker 4: And so you know, I much prefer a de escalation.
Speaker 3: I think both both sides really had a purpose in
Speaker 3: that meeting to talk constructively, to have a more de
Speaker 3: escalated environment, and that allows now for constructive conversations as
Speaker 3: they move forward.
Speaker 5: One year truth though? Is there pros and cons to that?
Speaker 5: That was one year truth though? Between the two? Is
Speaker 5: that a good or bad thing?
Speaker 1: I mean, what did it do in terms of business
Speaker 1: sentiment when there was a twelve month time frame?
Speaker 3: Now it's better then, it's better than an escalation at
Speaker 3: unreasonable levels, which is kind of where we were, you know,
Speaker 3: over the most recent time. Trade negotiations are complicated and
Speaker 3: there are a lot of issues on the table. They
Speaker 3: need thoughtful responses and responses that can be durable that
Speaker 3: both sides embrace and get to the right place. Yes,
Speaker 3: there's some uncertainty because it's a one year you know,
Speaker 3: it's a one year delay at all of this, but
Speaker 3: it's also a realistic period of time to try to
Speaker 3: get the right kind of deal done so both economies
Speaker 3: can move forward in a constructive way. And look, these
Speaker 3: are the two most important armies in the world. I
Speaker 3: think it's very important that you know, we arrive in
Speaker 3: a better place where we can both participate constructively with
Speaker 3: each other in the global growth of the world.
Speaker 2: I mean speaking of let me borrow your phrase, participate
Speaker 2: the there's been a resurgence in equity capital market raising
Speaker 2: here in Hong Kong. A lot of the Chinese companies,
Speaker 2: tech or otherwise are raising capital for the future. I
Speaker 2: want to get your sense as someone who sits in
Speaker 2: New York, you travel, of course all around the world.
Speaker 2: Is there a lot of appetite now from US based
Speaker 2: investors to participate by giving that capital to Chinese companies
Speaker 2: right now in order to do there's you know, I
Speaker 2: realize their ambition.
Speaker 3: Sure, there's there's there's there's more appetite for it than
Speaker 3: there was twelve months ago. I remember, actually last November,
Speaker 3: sitting in a dinner in the United States with a
Speaker 3: group of US investors, and this topic came up, and
Speaker 3: there were a couple of investors that basically said, we
Speaker 3: all should be looking to China.
Speaker 4: And the reason, the reason that had evolved that way
Speaker 4: is if.
Speaker 3: You look last fall, the prices had gotten so cheap,
Speaker 3: the capital flows had moved so in the other direction
Speaker 3: that you just knew that things would come more into
Speaker 3: balance and there'd be a recycling.
Speaker 4: And we've seen that recycling.
Speaker 3: You've seen a big move and prices year over year,
Speaker 3: you've seen more foreign capital come in and start to participate.
Speaker 3: That's a fundamentally different question about the big capital allocators
Speaker 3: really fundamentally shifting their allocations up to be higher.
Speaker 4: Again.
Speaker 3: So far, direct investment in China has come down, and
Speaker 3: I think one of the big questions is until we
Speaker 3: understand kind of the trade and the geopolitical landscape, it's
Speaker 3: harder to see significant shifts back to higher levels of
Speaker 3: foreign direct investment and more capital allocation.
Speaker 4: But for the moment, those flows are.
Speaker 3: Making for a better IPO market here and more opportunities here.
Speaker 5: How do you look at that?
Speaker 1: The whole competition has kind of changed into the dynamics, right,
Speaker 1: You have so many of these Chinese banks now that
Speaker 1: are doing some of these deals with Chinese companies. When
Speaker 1: it comes to going public, how how does Golden sas compete?
Speaker 3: Well, I you know, Golden Sex competes just fine, thank
Speaker 3: you very much. When it comes to taking public companies
Speaker 3: public on a global stage, Golden Sex is a leading position.
Speaker 3: We've had a leading position for fifty years. And there's
Speaker 3: always competition in the business, and you know, we'll continue
Speaker 3: to compete, so we welcome competition. But we have a
Speaker 3: pretty active footprint out here, as you well know, they
Speaker 3: have a pretty active footprint around the world.
Speaker 4: And look, one of the big advantages.
Speaker 3: I just had breakfast this morning with a company here
Speaker 3: that it's actually Chinese company, but the you know, the CEO,
Speaker 3: the founder was here and why does he value Golden Sex.
Speaker 3: He values Golden Sex because we have access to people, information,
Speaker 3: capital markets all over the world, you know, not just
Speaker 3: in a narrow portion of the world. And so it's
Speaker 3: a competitive business that always will be. But I'm I'm
Speaker 3: comfortable that we have the resources in the position to
Speaker 3: compete effectively.
Speaker 2: Right And you know, you know I've been reading up
Speaker 2: of course, and I understand your history. You guys have
Speaker 2: been doing business in China very long time. You guys
Speaker 2: took the big banks public back forwenty plus years ago.
Speaker 5: So I mean you're headed there.
Speaker 2: My understanding. After here, you're going to China of course
Speaker 2: to speak with regulators, what have you? What's your long
Speaker 2: term vision for difranchise in Greater China? What do you want?
Speaker 2: What do you want your franchise to become longuage.
Speaker 3: I think you have to look at Gold and Zachs
Speaker 3: and just think strategically that as a global firm, that
Speaker 3: when you think about our businesses, what are our two
Speaker 3: big businesses global banking and markets, the investment banking and
Speaker 3: trading business and asset and wealth management. And so if
Speaker 3: you think about how we think strategically about the firm,
Speaker 3: what advantages does the firm have Besides the fact that
Speaker 3: we have at scale businesses, we're very good at those activities.
Speaker 3: We're leaders in those activities, and we have a right
Speaker 3: to compete and win, you know, in those activities. Another
Speaker 3: big advantage for the firm is we're truly global, and
Speaker 3: in fact, we're more global and have a capacity to
Speaker 3: communicate and interact globally for our clients in a way
Speaker 3: that not.
Speaker 4: Many firms can.
Speaker 3: And so if you think about where GDP is in
Speaker 3: the world, where big economies are in the world, you know,
Speaker 3: China is always going to fit that bill. And barring
Speaker 3: a much more significant shift in geopolitics and the relationship
Speaker 3: between the US and China, they're definitely issues.
Speaker 4: They are definitely things that need to be sorted.
Speaker 3: But China's going to continue to be one of the
Speaker 3: most important economies in the world. The US is going
Speaker 3: to continue to be the most important economy in the world.
Speaker 4: And we're linked.
Speaker 3: And so as a big global firm that does what
Speaker 3: we do, we have to be long term committed to
Speaker 3: serving our clients that need access to advice, capital and resources,
Speaker 3: you know, in China and.
Speaker 4: Around the world.
Speaker 3: And of course we've got to do that in whatever environment,
Speaker 3: the regulatory structure or the geopolitics play up.
Speaker 4: But we're long term committed. We've been long term committed.
Speaker 3: And will remain long term committed unless there was something
Speaker 3: that significantly changed that.
Speaker 1: I'm glad you mentioned that because we've seen governments being
Speaker 1: I guess more involved in some of these business deals.
Speaker 1: I take a look at Intel, for example, I look
Speaker 1: at Nippon Steel, even seek Hutch, which a missas was
Speaker 1: a sole advisor to. What's the advice now to clients
Speaker 1: now in terms of that intervention risk, Well, you just.
Speaker 4: Mentioned three different deals and they're completely different, right, I
Speaker 4: mean they're completely completely different.
Speaker 3: Governments are always going to apply in and weigh in
Speaker 3: on different transactions. There are regulatory approvals in the United
Speaker 3: States arecifius there. I mean, there are all sorts of
Speaker 3: issues where government's weigh in. That is a very different thing,
Speaker 3: very different thing than a government taking an investment, you know,
Speaker 3: in a specific company. Sure it wouldn't surprise you. I'm
Speaker 3: not a big fan of that as a general practice.
Speaker 3: That doesn't mean there aren't exceptions, because I believe that
Speaker 3: the markets should allow capital formation and competition, you know,
Speaker 3: around companies, and you know this administration is is in
Speaker 3: one or two situations they're taking actions like that. You know,
Speaker 3: as I said, I'm not black and white and dogmatic.
Speaker 3: There can be exceptional circumstances, but I don't think as
Speaker 3: a general practice having governments take stakes and companies is
Speaker 3: the direction to travel.
Speaker 4: We want our free market system to go right.
Speaker 2: You mentioned how would you describe the current environment for
Speaker 2: deals going into next year? Because I remember just sitting
Speaker 2: here this time last year and we were going into
Speaker 2: twenty twenty five with it was a US election. We
Speaker 2: weren't sure what were the guard rails were going to
Speaker 2: be looking at next year. As a speaking with Van,
Speaker 2: I can't seem to think about think of a major
Speaker 2: risk apart from against Froth evaluation. We can talk about
Speaker 2: that later, but what's your sense of the environment right
Speaker 2: now and what risks we have to consider what's not
Speaker 2: obvious well in.
Speaker 3: The you know, in the US, the US is a
Speaker 3: huge part of the global M and A market, either
Speaker 3: for target or acquire right. You know, I would say
Speaker 3: it's extremely constructive and we see it. You know, in
Speaker 3: our advisory business. You could take a look at our
Speaker 3: you know, M and A revenues last quarter, what's your
Speaker 3: reflection of deals closing.
Speaker 4: But if you also go through our earnings.
Speaker 3: Call, you know, we made a comment about the level
Speaker 3: of our M and A backlaw.
Speaker 4: It's a very high level of our MNA backlaw.
Speaker 3: And that's just an indication of the fact that there's
Speaker 3: a lot of activity inside the firm. I say this
Speaker 3: is really rooted from the fact that we went through
Speaker 3: a period for four years during the Biden administration where
Speaker 3: if you wanted to do something strategically, if you wanted
Speaker 3: to do something significant from an M and A perspective,
Speaker 3: whatever the question was.
Speaker 4: The answer was no.
Speaker 3: We're now an environment where whatever the question is, the
Speaker 3: answer is maybe. And I think CEOs are unleashed in
Speaker 3: believing that they have a chance of doing strategic things
Speaker 3: to advance their position, to advance their scale, to advance
Speaker 3: how they sit competitively. And so we see a tremendous
Speaker 3: backlog of significant consolidating situations, what i'll call large cap
Speaker 3: M and A. Large cap M and A in the
Speaker 3: United States is up very very meaningfully deals over ten
Speaker 3: billion dollars, very very meaningfully year of a year. And
Speaker 3: so I think we're in a pretty constructive environment. And
Speaker 3: my expectation is is twenty six and twenty seven will
Speaker 3: be quite constructive in terms of large cap M and A,
Speaker 3: particularly in the United States.
Speaker 5: Obviously, we've been talking about AI.
Speaker 1: That's a big thing in terms of how does it
Speaker 1: work for Golden assass in terms of operational efficiencies, how
Speaker 1: does the onslought of AI really going to impact how
Speaker 1: you hire or even just headcount in this part of
Speaker 1: the world.
Speaker 3: Down to it, Well, it's you know, it's it's interesting
Speaker 3: to me that you go right to headcount and and
Speaker 3: I actually think that you know that that that's a
Speaker 3: different lens than the lens that we would look at.
Speaker 3: And I don't know if you saw, but when we
Speaker 3: reported earnings two weeks ago, we put out a memo
Speaker 3: that we called Goldman Sachs one Goldman Sachs three point
Speaker 3: zero where we highlighted the approach that we were taking
Speaker 3: to integrating AI and we talked about a handful of
Speaker 3: things that were goals, including you know, operating efficiency, automation,
Speaker 3: better sales management, and then we identified six processes that
Speaker 3: we were going to look at from a very fresh
Speaker 3: perspective to see if we could automate them and build
Speaker 3: better efficiency so that we would have more capacity to
Speaker 3: invest in areas in the business where we see growth opportunities.
Speaker 3: And so, you know, I think for a firm like
Speaker 3: Goldman Sachs, there are two avenues here. One, we have
Speaker 3: very smart people, right and we can put these tools
Speaker 3: in their hands and that makes them more productive. And
Speaker 3: by the way, that's no different than forty years ago
Speaker 3: when I was starting and somebody gave me a desktop
Speaker 3: computer and load US one two three software and I
Speaker 3: have the ability to do a spreadsheet and a fraction
Speaker 3: of the time that it took me before that tool
Speaker 3: was put into my hand. That just continues. That's been
Speaker 3: going on for forty years. It doesn't mean we have
Speaker 3: less smart people inside gold and secks. You look at
Speaker 3: Goldman Sachs productivity per person it's much higher today than
Speaker 3: it was twenty five years ago, and my guess is
Speaker 3: twenty five years from now it will be much.
Speaker 4: Higher than it is today.
Speaker 3: But our goal is to figure out ways that we
Speaker 3: can invest in growth because we see lots.
Speaker 4: Of growth in our franchise.
Speaker 3: By using AI technology to reimagine processes, we can create
Speaker 3: operating efficiencies and it gives us more of a scaled
Speaker 3: opportunity to reinvest in growth in the business. And look,
Speaker 3: of course, over the way, they are going to be
Speaker 3: shifts in jobs and job functions as there always have been.
Speaker 3: I think one of the things you've got to wrestle
Speaker 3: with today is the pace of this is quicker, and
Speaker 3: so since the pace is quicker, there's a chance that
Speaker 3: it might be a little bit more disruptive, you.
Speaker 4: Know, in the short term.
Speaker 3: But at the end of the day, technology changes jobs
Speaker 3: changes the way people work. This has been going on
Speaker 3: for a long long time. It is continuing. I don't
Speaker 3: think it's different this time.
Speaker 2: David, thank you so much for a time. I know
Speaker 2: you have to go and enjoy the conference. We'll see
Speaker 2: you again next time.
Speaker 4: You're inswer I appreciate it.
Speaker 2: Thank you very much for having me appreciate Thank you,
Speaker 2: David Solomon, there Guys Terman and CEO of Goldman Sachs