Speaker 1: It's turned out to one of our top interviews this
Speaker 1: morning from Saudi Arabia's Future Investment Initiative sum Much. Bloomberg
Speaker 1: has been speaking to CEO of Gold and Sachs David Solomon.
Speaker 1: Our Horizons Middle East Africa anchor Jimani Bressacci has been
Speaker 1: speaking to him. Here is the exclusive interview in full,
Speaker 1: starting with David Solomon's thoughts on Saudi Arabia as an
Speaker 1: investment destination.
Speaker 2: We are excited to be opening up a new office
Speaker 2: in the financial district, and I would say we are
Speaker 2: committed to our presence here in Saudi Arabia. I was reflecting,
Speaker 2: you know, last night, around the past eight years, seven
Speaker 2: or eight years that I've been coming to this event
Speaker 2: and just watching the progress, you know, and the progress
Speaker 2: has been meaningful, and we've participated in that progress. It's
Speaker 2: interested in what your clients here on the ground participate
Speaker 2: in that progress and be in a position.
Speaker 3: To try to help them. But also as you look
Speaker 3: at the international community.
Speaker 2: The international community is more interested in what's going on
Speaker 2: from an economic development perspective here, and we're delighted to
Speaker 2: be positioned to help our clients in this region.
Speaker 4: Yeah, and it feels like there is so much deal
Speaker 4: making even IPOs. Last year it was a great year
Speaker 4: in terms of activity across all these exchanges, which means
Speaker 4: also more and where banks are looking to get involved
Speaker 4: in the action. Are you finding it difficult to retain
Speaker 4: and attract talent given increasing amount of competition.
Speaker 2: We have a very very deep bench of bankers around
Speaker 2: the globe, including here in the region. We have a
Speaker 2: number of bankers from the region, the base out of
Speaker 2: London and sometimes move back to this region.
Speaker 3: We've been able to attract talent. We're Golden Sachs.
Speaker 2: We've been able to attract talent here in this region all.
Speaker 3: Other places in the world.
Speaker 2: I do agree there's more competition here, but that's positive
Speaker 2: and actually the levels of activity are picking up and
Speaker 2: I feel very very confident and our ability to have
Speaker 2: really extraordinary people on the ground here to serve our
Speaker 2: clients very well.
Speaker 4: One of the stories that our Bloomberg News team have
Speaker 4: you been reporting on is the fact that the PIF
Speaker 4: have been sort of refocusing some of their investment efforts
Speaker 4: at domestically, which means that in terms of the relationship
Speaker 4: with asset managers in the region, there's been a lot
Speaker 4: more focus on or questions asked about what some of
Speaker 4: these asset managers are delivering on the ground within Saudi Arabia.
Speaker 4: How do you think that is going to shape up
Speaker 4: the asset management's ambitions within the region and specifically with
Speaker 4: those lives.
Speaker 3: It's a very very natural progress.
Speaker 2: And we've been talking about what's going on here in
Speaker 2: the kingdom, but the level of investment in diversifying the
Speaker 2: economy here in the kingdom is significant, and of course
Speaker 2: that's a significant focus of the PIF.
Speaker 3: For a firm like.
Speaker 2: Golden Sachs, where we're well positioned to serve as an
Speaker 2: investment banker, to serve as a trader, to serve as
Speaker 2: an asset and wealth manager, I think the firm is
Speaker 2: incredibly well positioned to help in this part of the world,
Speaker 2: regardless of the trajectory.
Speaker 3: So we're excited about what's going on here.
Speaker 2: I'm excited about the opportunities we'll have to help serve
Speaker 2: our clients here.
Speaker 4: I can I ask you what your level of concern
Speaker 4: is vias to be the geopolitical situation in the region
Speaker 4: right now.
Speaker 2: I'm concerned about the geopolitical situation in the region. It's
Speaker 2: not good for security. It's not good for safety, it's
Speaker 2: not good for economic growth. And I'm hopeful that leaders
Speaker 2: both in the region and around the world, and important
Speaker 2: governments around the world will be able to find a
Speaker 2: path to settle.
Speaker 3: It down as we move forward.
Speaker 2: But of course, anytime you have geopotocon certainty, that's not
Speaker 2: good for economic growth and prosperity.
Speaker 3: And one of the things I just noticed i spend.
Speaker 2: Time with people here on the ground, people want to
Speaker 2: find a path to a secure, prosperous, economically vibrant in
Speaker 2: Middle least.
Speaker 4: Has it impacted business trading.
Speaker 3: In the region, You know, it's interesting.
Speaker 2: People are obviously concerned and very very focused, but it's
Speaker 2: not had a significant impact on activity up to this point,
Speaker 2: on activity in this part of the region.
Speaker 4: Yeah, well, let's just stop. More broadly, your earnings came
Speaker 4: out very strong, sur fascinating expectations. Obviously the stock has
Speaker 4: had a good run this year. You must be feeling good.
Speaker 4: But let me just ask you how you're feeling about
Speaker 4: the outlook in general.
Speaker 3: I feel good about the outlook.
Speaker 2: I think you know, if you took a tour around
Speaker 2: the world, the US economy is actually doing quite well.
Speaker 3: It's been very, very resilient.
Speaker 2: I'm a little bit more concerned about European growth and
Speaker 2: also the economic situation in China, but overall, the engine
Speaker 2: of the US has been quite powerful, and our building
Speaker 2: our business while.
Speaker 3: Global, is quite correlated to US growth. I can give
Speaker 3: you a.
Speaker 2: List of things to worry about, but generally I can
Speaker 2: tell you also a list of things that I'm quite
Speaker 2: optimistic about. The progress around technology and AI and the
Speaker 2: opportunities to increase productivity, or real progress that we're seeing
Speaker 2: around healthcare and medical technology or extraordinary and the impact
Speaker 2: that they'll have.
Speaker 3: So there are a lot of reasons to be optimistic about.
Speaker 2: The growth and trajectory of economies around the world, but
Speaker 2: there's also fragility and things can go wrong.
Speaker 4: Well, I was going to pick up on that because
Speaker 4: it's been really difficult to sort of track the narrative
Speaker 4: around the US economy the last few months, because we've
Speaker 4: gone from hard landing to soft lanning. Now people are
Speaker 4: talking about no lanning. I'm not going to ask you
Speaker 4: for a descriptor of the US economy, but what I
Speaker 4: will ask you is, where are some areas of concern
Speaker 4: that you're seeing?
Speaker 2: Well, the base case in the US is certainly at
Speaker 2: this point for a soft landing. That doesn't mean that
Speaker 2: at some point there can't be, you know, some sort
Speaker 2: of a slow down in economic growth. But what I
Speaker 2: would say is the US economy is proving to.
Speaker 3: Be incredibly resilient.
Speaker 2: We do have an election in the US and there'll
Speaker 2: be policy decisions that come out of that election, and
Speaker 2: so you know, certainly those will have an impact on
Speaker 2: the trajectory in twenty twenty five and twenty twenty six.
Speaker 2: With respect to you know, European growth, European growth is
Speaker 2: more sluggish at the moment. And I'm concerned about the
Speaker 2: same thing that many people I know are talking to
Speaker 2: you about at this event, geopolitics US China relationship, the
Speaker 2: situation in Ukraine, the situation we just touched on in
Speaker 2: the Middle East. Also concerned, you know, broadly about inflation
Speaker 2: in the world. Concerned about energy policy, which is obviously
Speaker 2: a significant issue. I'm concerned about immigration and migration which
Speaker 2: is an issue in different parts of the world. So
Speaker 2: these are all issues that require leadership and policy direction.
Speaker 2: And I'm hopeful as we get past the election in
Speaker 2: the US and we continue to move forward we'll see
Speaker 2: a clear direction of travel on some of these significant
Speaker 2: policy issues.
Speaker 4: Well, I mean, the other big development is obviously the
Speaker 4: said have started cutting interest rates. And I think you
Speaker 4: were asked about what your expectations were for the said
Speaker 4: the last I already said a thirty percent chance of
Speaker 4: a fifty basis one cut. So we'll give you that
Speaker 4: they went for the fifty. But what matter is more,
Speaker 4: as you think for financial markets, how quickly they go
Speaker 4: or where they end up.
Speaker 2: I mentioned I think there's an awful lot of attention
Speaker 2: on short term rates. I'd actually be focused over time
Speaker 2: on longer term rates. And you know, you know, I
Speaker 2: continue to be concerned about the level of spending and
Speaker 2: deficits in the United States. I don't think that's a
Speaker 2: short term, you know, crisis factor. But unless we have
Speaker 2: policy change and get our spending and our debt under control,
Speaker 2: you know, ultimately that's kind of a bigger impact on
Speaker 2: long term rates. And I think people are anticipating today
Speaker 2: with respect to the short end of the curve. I
Speaker 2: think it's going to be very data dependent, and that
Speaker 2: data will be driven in part by what kind of
Speaker 2: policy we see coming out of the Yeah, and so
Speaker 2: I think it's important to watch carefully. It seems like
Speaker 2: the FED has been relatively transparent that we'll get another
Speaker 2: interest rate cut before the end of the year, But
Speaker 2: after that, I think it will be very data dependent
Speaker 2: on what kind of policy implementation. What happens to growth.
Speaker 2: Are the inflation numbers actually improving further?
Speaker 4: You know?
Speaker 2: Those are all things I think the FED will be
Speaker 2: watching carefully.
Speaker 4: Can I just circle back to your first point vis
Speaker 4: a vis spending, the send your treasuries trading around four
Speaker 4: point three percent, so you think that is ad and
Speaker 4: put the pricing in the fiscal premium in the years
Speaker 4: to come to us.
Speaker 2: The market's the market, and so it is absolutely pricing
Speaker 2: in the premium that the market perceives today. What I
Speaker 2: would just say, if you look at the trajectory of
Speaker 2: our spending and our debt and the interest burden that
Speaker 2: we have, I think over time and over time is
Speaker 2: through the rest of the decade, et cetera, we'll have
Speaker 2: to bring new buyers into US treasuries and that will
Speaker 2: potentially have a risk of putting pressure on longer rates
Speaker 2: unless we want to finance the whole treasury stack at
Speaker 2: the front under the curve which will be a very
Speaker 2: very significant policy shift.
Speaker 4: I want to ask to you a little bit more
Speaker 4: about your trading numbers, since they came in stronger than expectations,
Speaker 4: and earlier on you had guided that fixed income trading
Speaker 4: was gonnessee to clients, but overall for the quarter, you
Speaker 4: ended up posting quite strong trading results, namely on the
Speaker 4: back of your equity trading business. Was this sort of
Speaker 4: a one off because there was so much volatility and
Speaker 4: equities this quarter or can we expect that momentum to
Speaker 4: continue more?
Speaker 2: Equity franchise is performing very very well. We have the
Speaker 2: leading equity franchise of the big banks. It's something we've
Speaker 2: invested in, it built over a long period of time.
Speaker 2: I can't tell you quarter to quarter what the market
Speaker 2: environment will put up for that franchise, but we were
Speaker 2: our positioned very well to serve our clients and have
Speaker 2: a leading share position in that business. When I commented
Speaker 2: about our trading revenues in early September, at the very
Speaker 2: beginning of September at a conference in New York, the
Speaker 2: business was softer.
Speaker 3: It had been softer in August, particularly in fixed income.
Speaker 2: We had a very very strong comp from the third
Speaker 2: quarter in twenty two three, and ultimately our fixed income
Speaker 2: business was softer.
Speaker 3: Year over year.
Speaker 2: But I did say when I made that comment that
Speaker 2: it would be very very dependent on what happened in September,
Speaker 2: and we actually had a more robust September than we expected.
Speaker 4: Yeah, well, Marcus said, do you think you can continue
Speaker 4: to gain market share of the trade inside?
Speaker 2: We do believe there are opportunities for us to continue
Speaker 2: to take share, although we're operating in a leading share position,
Speaker 2: so those gains will not be as pronounced as they've
Speaker 2: been over the last five years. But we think we
Speaker 2: have a very very powerful ecosystem in our global Banking
Speaker 2: and Markets franchise. Our one GS operating ethos is helping
Speaker 2: us serve our clients in a very very you know,
Speaker 2: forward and exceptional way. And if you are patient, you
Speaker 2: take a long term view, you earn trust, you show
Speaker 2: up for your clients, and good times and bad over time,
Speaker 2: you gain share in these businesses and more.
Speaker 3: Very focused on the.
Speaker 4: Outlooks like right now for deal making, Yeah.
Speaker 3: Look for deal makings improving. You know, I talked, I
Speaker 3: talked on earnings on our earnings call about the fact
Speaker 3: that our m and a backlog had improved.
Speaker 2: I talked about some headwins, particularly on the regulatory side.
Speaker 2: I think the regulatory environment has been a headwind to
Speaker 2: some deal making. Obviously, with an election, we could see
Speaker 2: a change in that context. But there's no question the
Speaker 2: deal making environment is improving. And when you look at
Speaker 2: what's going on with technology and the investment that's necessary
Speaker 2: to power AI, I think that's a tailwind for deal
Speaker 2: making over a period of time too. A lot of change,
Speaker 2: a lot of opportunity, and when there's change, leaders are
Speaker 2: constantly looking to make sure that their positions strategically to
Speaker 2: have a leadership position.
Speaker 3: As the world of olfs well, I.
Speaker 4: Know you've also been making a big push into your
Speaker 4: alternatives business. Private credits is an area of focus. What
Speaker 4: is the opportunity that you see there, because it really
Speaker 4: feels like that has become the major focus of the market.
Speaker 4: Many many of different players are looking to get.
Speaker 3: Involved in that.
Speaker 2: But we've been in the private credit business for over
Speaker 2: thirty years. We have one hundred and forty billion dollars
Speaker 2: in private credit assets. We've been a leading private credit
Speaker 2: player since the nineteen nineties. What I would say is
Speaker 2: there continues to be secular growth around the opportunity set
Speaker 2: for additional private credit formation, and we're very very well
Speaker 2: positioned given way the firm sits to be a very
Speaker 2: very unique player in that. Obviously, in our asset management business,
Speaker 2: we manage significant private credit assets, but we also have
Speaker 2: one of the leading syndication franchises. We have an ability
Speaker 2: to originate and distribute in addition to be an.
Speaker 3: Investor through asset management business. That's a very unique combination.
Speaker 2: I think it positions our firm very well, and you
Speaker 2: will see, in my opinion, continued secular growth in private
Speaker 2: credit formation. I still think we're early on that cycle.
Speaker 4: What do you think lower interest rates do for the
Speaker 4: private credit landscape?
Speaker 2: Though give so much of the I think that private
Speaker 2: credit it's not immune to lower interest rates, but there
Speaker 2: are different ways that we can finance activity, and private
Speaker 2: credit is a very important part of that. People use
Speaker 2: private credit as a very very broad term. Are we
Speaker 2: talking about insurance companies financing investment grade companies? We're talking
Speaker 2: about investment grade financing. Are we talking about below investment
Speaker 2: grade corporate financing? Are we talking about direct lending to small.
Speaker 3: And medium sized enterprises?
Speaker 2: These are all different forms of private credit and the
Speaker 2: reality of it is regardless of what the interest rate
Speaker 2: environment is, people need to finance, and so of course
Speaker 2: in the short term movements and interest rates have an
Speaker 2: impact in short term activity, but we're talking about the
Speaker 2: engines of finance that drive capital structure in a whole
Speaker 2: variety of ways.
Speaker 3: This is not something that's cyclically tied to short term interstry.
Speaker 4: Can I just in an updates on how you see
Speaker 4: newer consumer finance business and the pathway ahead from Gorman.
Speaker 2: We've been very clear over the last few years that
Speaker 2: we're narrowing our consumer focus and we've taken active steps
Speaker 2: to do that. We continue to have a very very
Speaker 2: powerful deposit platform under markets, but we continue to take
Speaker 2: steps to narrow our consumer activity. We're focused on our
Speaker 2: two big businesses, global banking and markets and asset and
Speaker 2: wealth management, and we feel good about the way we're positioned.
Speaker 4: Well. We've been speaking for I guess like fifteen minutes
Speaker 4: and I still haven't up the big US election coming
Speaker 4: off next week. Let me just ask you this, because
Speaker 4: as a bank, I'm sure you would have run scenario
Speaker 4: analysis on what will happen either way. What would you
Speaker 4: say is the biggest risk for your business for either outcome,
Speaker 4: a Harris win or a Trump win.
Speaker 2: We're watching the election like everybody else. The good news
Speaker 2: is it's coming up, you know, next week, and you know,
Speaker 2: my hope would be, you know, shortly after election night
Speaker 2: we have a clear direction of travel in terms of
Speaker 2: what the next administration will be. Goldman Sachs is set
Speaker 2: up in position to help and support either administration either outcome,
Speaker 2: and to support our clients at.
Speaker 3: Either of those outcomes. And so we're watching like everybody else.
Speaker 2: It's going to be a close election and we'll see
Speaker 2: in the next couple of weeks what the direction of
Speaker 2: travel is.
Speaker 4: Do you think it might have a knock on it
Speaker 4: knock on effect on a regulation and some of the
Speaker 4: regulatory stunts.
Speaker 2: That's taken there is There's there's no question that the
Speaker 2: regulatory pendulum has swung, you know, pretty significantly over the
Speaker 2: last few years. And my hope would be an either
Speaker 2: administration there'll be a fresh look at how we can
Speaker 2: ensure regulations important to keep guardrails in the economy and
Speaker 2: to keep our economy moving in an appropriate way. But
Speaker 2: at the same point, that pendulum can swing too far
Speaker 2: and then it can become a headwind to growth, and
Speaker 2: I'm hopeful, you know, on both sides of the aisle,
Speaker 2: there'll be a fresh look after the election to make
Speaker 2: sure we get that balance correct.
Speaker 1: So that was the CEO of Goldman Sachs David Solomon
Speaker 1: there speaking to Bloomberg's Jumana Barsacchi at the Future Investment
Speaker 1: Initiative summit in Saudi Arabia.