高盛 (GS) 2016 Q4 法說會逐字稿

Good morning.

My name is Dennis and I will be your conference facilitator today.

I would like to welcome everyone to the Goldman Sachs' fourth-quarter 2016 earnings conference call.

This call is being recorded today, January 18, 2017.

Thank you.

Mr. Holmes, you may begin your conference.

Good morning.

This is Dane Holmes, Head of Investor Relations at Goldman Sachs, and welcome to our fourth-quarter earnings conference call.

Today's call may include forward-looking statements.

These statements represent the Firm's belief regarding future events that, by their nature, are uncertain and outside of the Firm's control.

The Firm's actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements.

For a discussion of some of the risks and factors that could affect the Firm's future results, please see the description of Risk Factors in our current Annual Report on Form 10-K for the year ended December 2015.

I would also direct you to read the forward-looking disclaimers in our quarterly earnings release, particularly as it relates to our investment banking transaction backlog, capital ratios, risk-weighted assets, global core liquid assets and supplementary leverage ratio.

And you should also read the information on the calculation of non-GAAP financial measures that is posted on the Investor Relations portion of our website at www.GS.com.

This audiocast is copyrighted material of The Goldman Sachs Group, Inc.

and may not be duplicated, reproduced or rebroadcast without our consent.

I'll now pass the call over to our Chief Financial Officer, Harvey Schwartz, who is also joined by our Deputy CFO, Marty Chavez.

Harvey?

Thanks, Dane, and thanks to everyone for dialing in.

As many of you are aware, Marty will be assuming my position in April.

As you would expect, we are already working side by side to ensure a smooth transition in the coming months.

During his career, Marty held positions of increasing responsibility in investment banking, institutional client services, and then most recently as our Chief Information Officer.

During that time, Marty established a track record of creating tremendous value for both our clients and our Firm.

Having worked closely with him for over a decade, I have full confidence that Marty will continue that track record as our Chief Financial Officer.

With that, Marty would like to make a few comments.

Thanks, Harvey.

Just a few brief words from me.

I really enjoyed the opportunity to meet many of you in my prior role as CIO.

I look forward to building upon existing relationships and building new ones in the months and years ahead.

I've always found our conversations to be extremely insightful and valuable to effectively managing our Firm.

Goldman Sachs has a long tradition of vigilantly focusing on risk management, operational excellence and maintaining a conservative financial profile.

In my new role, I have every intention of continuing that focus and tradition.

With that, I will turn it back to Harvey.

Thanks, Marty.

Let's walk through the fourth-quarter and full-year results, then Marty and I are happy to answer any questions.

Briefly on the fourth quarter, net revenues were $8.2 billion, net earnings were $2.3 billion.

Earnings per diluted share were $5.08 and annualized return on common equity was 11.4%.

With respect to our annual results, we he had Firm-wide net revenues of $30.6 billion, net earnings of $7.4 billion.

Earnings per diluted share of $16.29, and a return on common equity of 9.4%.

We grew book value per share by 6.7% year over year.

When reviewing 2016, it's helpful to contrast the performance between the first half of the year and the second half.

The year began with a number of challenges but ultimately ended with a lot of positive momentum.

For example, the start of the year which has historically been a period of high activity, was instead impacted by significant concerns regarding the economic outlook.

Equity markets posted substantial declines and credit spreads widened materially at the start of the year.

This combination of factors translated into a difficult operating environment for our clients, and by extension, for our Firm.

In the second quarter, concerns regarding global economic growth moderated but other concerns, including the potential implications of the Brexit vote, surfaced.

Ultimately, net revenues in the first half of the year declined by 28% year over year, with the vast majority of that decline occurring in the first quarter.

Switching to the back half of the year, the global economic outlook improved, reflecting solid economic reports, particularly in the US.

The prospect of diverging monetary policy and more pro-growth policies in the United States drove both activity levels ands asset prices higher.

For example, various fixed-income market volumes in the second half of 2016 rose double digits year over year.

US investment-grade credit spreads tightened by nearly 40 basis points.

US high-yield spreads tightened by over 150 basis points.

And the MSCI World index climbed 6% during the period.

Ultimately this drove improved client sentiment and a better environment.

As a result, net revenues in the back half of 2016 increased by nearly 16% year over year and included two consecutive quarters of 11%-plus returns on equity.

In short, we ended the year with positive momentum and a significantly improved operating environment.

With that as a background, let's discuss the individual businesses in greater detail.

As it relates to the quarter, investment banking produced net revenues of $1.5 billion, 3% lower than the third quarter.

A pick up in M&A was more than offset by a decline in underwriting.

For the full year, investment banking net revenues was $6.3 billion, down 11% from 2015, on a decrease in equity underwriting and financial advisory revenues.

This was partially offset by record debt underwriting revenues of $2.5 billion.

Our franchise remains very well positioned.

We ended the year as a leader in global announced and completed M&A and as a leading equity and debt underwriter globally.

Breaking down the components of investment banking in the fourth quarter, advisory revenues were $709 million.

The 8% improvement relative to the third quarter reflects an increase in the number of completed M&A transactions.

We advised on a number of significant transactions that closed during the fourth quarter, including Procter & Gamble's $12.5 billion merger of its beauty business into COTY, Fortis Inc.'s $11.8 billion acquisition of ITC Holdings Corp.

and Rackspace Hostings' $4.3 billion sale to Apollo.

We also advised on a number of important transactions that were announced during the fourth quarter, including Qualcomm's $47 billion acquisition of NXP Semiconductors, B/E Aerospace's $8.3 billion sale to Rockwell Collins and Capsugel's $5.5 billion sale to Lonza Group.

Moving to underwriting.

Net revenues were $777 million in the fourth quarter, down 12% sequentially, as debt and equity issuance slowed.

Equity underwriting net revenues of $212 million were down 7% compared to the third quarter, as follow-on offerings decreased.

Debt underwriting net revenues decreased 13% to $565 million from robust issuance levels in the third quarter.

During the fourth quarter we actively supported our clients' financing needs, participating in Synergy's EUR4.6 billion IPO, Tesoro's $1.6 billion high-yield bond offering and Athene's $1.2 billion IPO.

Our investment banking backlog improved from the third quarter.

It was lower compared to our very strong level at the end of 2015.

Turning to institutional client services which comprises both our FICC and equity businesses, net revenues were $3.6 billion in the fourth quarter, down slightly compared to the third quarter.

For the full year, $14.5 billion of net revenues were down modestly compared to 2015.

FICC line execution net revenues were $2 billion in the fourth quarter, up slightly quarter over quarter, as many businesses benefited from increased client activity.

This more than offset typical year-end seasonality.

Commodities increased significantly during the quarter as higher energy prices drove better market-making conditions and more client activity.

Currencies was higher compared to the third quarter amid increasing client activity.

Rates were down slightly relative to the third quarter.

Client activity was solid, driven by diverging monetary policies.

Credit and mortgages decreased in an environment that included less issuance and generally tighter spreads.

For the full year, FICC line execution net revenues were $7.6 billion.

This translated into a 6% increase year over year, excluding DBA gains from 2015 results.

Given the difficult market conditions in the first quarter of 2016, 6% growth, particularly notable.

In equities, which includes equities client execution, commissions and fees and security services, net revenues for the fourth quarter were $1.6 billion, down 11% sequentially.

Equities client execution net revenues were $459 million, down significantly across both derivatives and cash products.

Commissions and fees were $736 million, up slightly relative to the third quarter, as global client volumes increased modestly.

Security services generated net revenues of $398 million, up modestly on a sequential basis.

For the full year, equities produced net revenues of $6.9 billion, down 12% year over year.

In 2016, we were impacted by less favorable market conditions and lower client activity in equities client execution.

This compared to a relatively robust performance in the first half of 2015.

Turning to risk.

Average daily VaR in the fourth quarter was $61 million, up from $57 million in the third quarter.

Moving on to our investing and lending activities.

Collectively these businesses produced net revenues of $1.5 billion in the fourth quarter.

Equity securities generated net revenues of $1 billion, reflecting corporate performance as well as sales and gains in public equity investments.

Net revenues from debt securities and loans were $457 million which was largely driven by net interest income of roughly $300 million.

For the full year, investing and lending generated net revenues of $4.1 billion, driven by $2.6 billion in gains from equity securities and $1.5 billion of net revenues from debt securities and loans.

Our net interest income within debt securities was more than $1 billion for the year.

In investment management, we reported fourth-quarter net revenues of $1.6 billion.

This was up 8% from the third quarter primarily as a result of $224 million in incentive fees, largely from alternative investment products.

For 2016, investment management net revenues were $5.8 billion, down 7% year over year, largely due to lower incentive fees.

For the fourth-quarter assets under supervision finished at a record $1.38 trillion.

The $32 billion increase versus the third quarter was driven by $17 billion of long-term net inflows, $31 billion of net inflows into liquidity products, partially offset by $16 billion of market depreciation.

On a full-year basis, we had $42 billion of long-term net inflows, primarily driven by fixed income and $52 billion of liquidity product inflows.

Now let me turn to expenses.

Compensation and benefits expense which includes salaries, bonuses, amortization of prior-year equity awards and other items such as benefits, was down 8% for 2016 reflecting the decline in net revenues.

This translated into a compensation and net revenues ratio of 38.1%.

Fourth-quarter non-compensation expenses were $2.3 billion.

The quarter included a $114 million donation to Goldman Sachs Gives, our donor-advised charitable fund.

For the full year, non-compensation expenses were down significantly due to a decrease in provisions for litigation and regulatory matters.

Excluding litigation provisions, non-compensation expenses would have been down slightly year over year.

Now I'd like to take you through a few key statistics for the end of the year.

Total staff was approximately 34,400, down slightly from the third quarter.

Our effective tax rate for the year was 28.2%.

Our global core liquid assets ended the fourth quarter at $226 billion.

And our balance sheet was $862 billion.

Our Common Equity Tier 1 ratio was 14.5% using the standardized approach.

It was 13.1% under the Basel III advanced approach.

Our supplementary leverage ratio finished at 6.4%.

Our prudent approach to capital management is demonstrated by the strength of our capital ratios and has supported our return of excess capital to shareholders.

In the fourth quarter we repurchased 7.6 million shares of common stock for $1.5 billion.

For the full year, we repurchased $6.1 billion at an average purchase price of roughly $166 per share.

As a result, we reduced our basic share count by approximately 27 million shares for the year, reaching a new record low.

In addition, we paid out approximately $1.1 billion of common dividends over the course of the year.

In total, we returned $7.2 billion of capital to shareholders in 2016.

Before taking questions, a few closing thoughts.

As we have said many times before, we have a healthy respect for the dynamic nature of our industry and we have an established track record of being responsive to changes in operating environments.

As we discussed, the first half of 2016 was challenging.

In response, we undertook and competed a $700 million expense initiative in the first half of the year.

We continued those efforts in the second half of the year and ultimately generated nearly $900 million of run-rate savings.

When undertaking any expense initiative, it's all about finding the right balance.

You want to protect near-term results without impacting long-term prospects.

We believe we found the right balance in 2016.

This can be seen in our ability to effectively serve our clients as activity picked up in the second half of the year.

It's also reflected in our continued investment in technology and infrastructure, including our launch of Marcus.

Most importantly, our expense discipline and the strength of our client relationships leaves us well positioned to deliver significant operating leverage to our shareholders in a better operating environment.

In summary, we enter 2017 from a position of strength.

We have a robust financial profile, ending the year with $226 billion in liquidity, more than a quarter of our balance sheet.

All of our risk-based capital ratios are well in excess of regulatory requirements while our share count sits at a record low.

Importantly, this means we have the flexibility to navigate shifts in the operating environment, including the positive scenario where we experience a significant increase in client activity.

Finally, our global franchise remains as strong as ever, reflecting our commitment and investment to serve our clients.

Meeting their core objectives will continue to be the basis for our long-term success.

Thank you again for dialing in.

Marty and I are happy to answer your questions.

(Operator Instructions)

Glenn Schorr, Evercore.

Hi.

Thanks.

Good morning.

Good morning.

I have a fixed income related question.

Back in the first quarter of 2015 the Swiss re-pegged and things went bonkers for a couple weeks.

You guys made a ton more money.

But then things died down for like six quarters.

This quarter we obviously had the election and a couple other events and things went bonkers.

But it feels very different to me and more permanent and client needs are changing and we have monetary policy divergence.

So I'm leading the witness here, but does it feel different to you guys?

And does that equate to this could be the first year in many that the fixed income fee pool could grow?

It's a great question.

The quarter you're reflecting on, obviously the first quarter of 2015, very strong quarter for us.

We had nearly a 15% ROE.

That was the quarter, as you point out, there were monetary policy announcements.

And I think there was a little bit of a relief activity there, because that was viewed as increased monetary policy QE and that was a [tren no].

As we all saw, over a period of time that ultimately led more to concerns about lackluster growth.

And it led to concerns about deflation and then it led to concerns ultimately that actually QE policies at the limit may not be effective and may actually present risks.

I would say you could look at our fourth quarter but I think it would be better to look really at the second half of the year.

And what we saw from clients in the second half of the year was basically a build of confidence and expectation that we might see stronger fiscal policy, (technical difficulty) of interest rates that we weren't headed into a deflationary cycle, more confidence about economic growth.

And so I would say there was increased optimism around the world.

Now, those are the kind of things that always drive our business.

Our clients are very sensitive to that.

It changes sentiment.

So I would say that felt more like a trend across the past six months of the year.

Okay.

Maybe some of your ex-colleagues could send some more tweets and increase activity levels.

Kidding.

Last question on I&L.

It's good to have that reprieve in terms of the I&L-funded divestments.

I'm curious if it changes at all how you approach the way we ask you every quarter about what's left in equity, what do you need to divest, and that whole game plan?

I'm curious on your thoughts there.

Happy to walk you through it.

In the order I walk you through every quarter, the Volcker [cover fund] is more than $6.7billion.

You take out an amount that conforms, that's $200 million.

That leaves you with $6.5 billion.

Of the $6.5 billion, $1.8 billion of that is in a fund but those entities are already public.

They're trading publicly on exchanges.

So they're already liquid, they're just in a process of being sold down.

So, now, with respect to Volcker, as was more or less expected by the marketplace, because you remember, under the original construct of Volcker, it was never designed to force sales.

It was obviously very encouraging of compliance, so there was an expectation everyone would do what they could in good faith to comply.

But again, there was no desire for fire sales.

The expectation here is that we've now submitted for the extensions.

We'll go through the extension process, but we've been a good faith actor.

If you read their communication you would expect extensions to be approved broadly across the industry.

For us it hasn't changed the approach of the business.

It's always been about ensuring that we provide the best returns for our clients.

Because, as you know, we're invested along side our clients in these funds.

Probably more than you wanted, but I just figured I'd cover the whole thing.

I appreciate it.

Thank you.

Go ahead, we can go on to the next person.

Thanks.

Thanks, Glenn.

Christian Bolu, Credit Suisse.

Good morning, Harvey.

And then welcome aboard, Marty.

Thank you.

Hate to nitpick in a strong quarter, but performance in equities was noticeably weaker than peers.

Curious if there were any one-time items in the quarter or anything that you think drove under-performance?

And then maybe more broadly, if you could update us on how you're feeling about the competitive position in that business.

So look, I think you're right to point out it wasn't our strongest quarter.

In terms of the franchise, we feel great about the franchise at this stage and certainly we feel quite good about the competitive dynamic.

No matter how you look at the business, whether you look at it as our global footprint, prime services, our ability to commit capital, our position in underwriting, we feel incredibly good about it.

Quarter to quarter there are always going to be one-offs.

There are a handful of things that were less than perfect this quarter, but I wouldn't read anything into it.

Okay.

And then since this is your last one, I'll give you a pretty one-kick accounting question here.

The accounting standards for the tax impact of share-based compensation, I believe it's scheduled to change this year.

Given share-based comp is a meaningful part of your income statement, I'm curious if that has any impact on your forward -- the way your income statement looks going forward?

Yes.

It's a very detailed question; it's great that you're asking it, actually.

Everyone might not be as aware as you are, Christian.

Under a GAAP change, basically the change requires us to recognize the tax impact of the difference in the value of shares that we grant, which at grant date versus delivery date, in our tax expense line on the income statement.

Now, prior to the change, that would have happened in shareholders equity.

So there's two observations here.

As best we can estimate it today, it could be in a range of $400 million to $500 million in terms of a reduction in the tax rate.

But this is just a geographic realignment under GAAP.

This has no impact to capital or the strength of our capital, but you will see a shift in the recognition.

And obviously anyone can feel free to follow up more with Dane if you really want to get into the details of the GAAP stuff.

Okay, that's very helpful.

Thank you.

Michael Carrier, Bank of America.

Mike, are you there?

Mike, are you there?

Michael, check your line to see if you're on mute.

One moment.

Michael, are you there?

Yes, can you hear me?

Yes, we can hear you now, Michael, but we couldn't hear you before, so if you asked a question we didn't get it.

Okay, no problem, thanks a lot.

First one, on expenses, you guys have been doing a very good job on controlling the expenses and we saw the operating leverage in the quarter.

Wanted to get a sense, depending on what potential changes happen with policy and regulation, is there some way to give us some context on the amount that has been spent, whether it's on regulation, compliance, technology, since 2011, 2012, that could shift around depending on the outlook?

Obviously there's a lot of core that's going to stay in place, but wanted to get a sense on what that increase has been despite you guys managing the overall expense base [wall].

Difficult to quantify that for you.

Obviously it's been a huge investment in terms of risk, technology, compliance, and we continue to invest.

I think the thing that we've been able to do is as we've invested and as we've complied with the rules, we've been able to use technology and training across the teams to be as efficient as possible.

Which is why this year you would have seen that non-compensation expense was the lowest it's been since 2007 and we were also able to also execute the $900 million run-rate savings.

Who knows where we'll end up in terms of the rule set, but obviously we'll always look to comply and comply in the most efficient way possible over time.

Okay.

And then as a follow-up, it's been a while since we've been in an environment where people are more positive on the growth outlook.

Just wanted to get a sense, and this is somewhat in line with Glenn's question on FICC but maybe broader on trading and banking.

What do you guys look at in terms of seeing that pick-up in client engagement?

I know you mentioned the IB pipeline is up quarter over quarter.

But even on trading in terms of balances, investment management, maybe inflows, wanted to get some sense of how we can see the follow-through or the impact of better economy and that translating into stronger revenues.

It's a great question.

The thing that informs us the most is the work that all of our people do, whether they're in banking, asset management, whether they're in equities or fixed income, all around the globe, engage with their clients every day.

These are relationships that build up over decades; they're invested in over decades.

Our teams are sitting with CEOs, they're sitting in Boardrooms.

The best way for us to get a pulse on that globally is the feedback we get from clients every day.

And as you know, over the past several years there's been a general sense of concern with respect to the global growth that was reinforced by a lot of the monetary policy around the world.

So I would say as we come into 2017, activity levels are quite high.

We've come out of a very low-volume, low-volatility environment over a number of years.

We'll have to see how this year progresses.

But with the shifting policies around the globe it's an extraordinary catalyst for client dialogue, for decision making, and for content.

That's really where, as a Firm, that's where we really want to drive value.

We want to drive value with content (technical difficulty).

Okay.

Thanks a lot.

Thank you.

Matt O'Connor, Deutsche Bank.

Good morning.

Given some of the increased optimism that you've talked about on this call and the pipelines, big picture, how do you think differently about the staff?

Call it how much you lean forward versus trying to optimize the last several years, you and the industry have been focused on optimizing to the lower pool of revenues, the tougher regulatory environment.

How do you think (technical difficulty) it's not going to be a complete 180 degrees going to maybe being aggressive.

But how do you think about leaning forward a little bit more or is it too early to think that way?

This is all just about balance.

We're in a cyclical business within a pro-cyclical industry.

So as we make decisions about investing and controlling expenses, these things aren't mutually exclusive.

If you look at the past year, obviously we responded very quickly to the tough first quarter.

As I mentioned, we finished with $900 million of run rate savings completed in the year.

But at the same time, we never stopped hiring.

We launched Marcus.

We acquired the digital lending platform.

And so we stayed very front-footed and we feel well positioned.

Now, to the extent to which there are more demands on the Firm, by creating efficiencies through this part of the cycle, it gives us the flexibility to invest in an improved part of the cycle.

That's the best thing about having capital ratios as strong as our capital ratios are right now, or having liquidity levels where they are.

Because the extent of which there's demand, we can respond to it.

You can be well positioned and you can be efficient at the same time.

Okay.

Thank you very much.

Thanks, Matt.

Mike Mayo, CLSA.

Hi.

Hey, good morning, Mike.

This is the first change since the announcement about Gary Cohn.

So Harvey, how do you approach your new position?

And then for Marty, how does your past experience help you or maybe present a challenge for you in the CFO role.

Going from CIO to CFO is somewhat unique.

Well, obviously we're all going to miss Gary.

It's fantastic that he's willing to contribute all of his experience to our country.

And it's a long tradition of senior leaders at Goldman Sachs doing that.

So again, we're all going to miss Gary but we're all quite proud of what he's decided to do.

In terms of the transition in my role, I've obviously been CFO for a bit over four years.

David Solomon and I, we've been on management committee for years.

We sat on the same floor for years.

We each have affinities based on our experience.

David spent more time in investment banking; I've spent more time in institutional client services.

But I think it lays out pretty easily actually in terms of how he and I will work across the Firm.

It's a big place with lots of clients so we're both pretty excited about it.

And that transition's already under way.

In terms of the transition with Marty, we've already been working side by side.

Marty's been shadowing me for a couple of weeks and then he's working on his transition.

For those of you who met Marty, I don't know, he's about 150 pounds less than I am.

So following in my shadow sounds like a strange thing.

But that's how we're approaching it.

We have a deep bench, Mike, so we've done these things across the Firm for years.

And can we hear -- Marty, are you ready to talk to us?

Sorry, Mike, of course.

Sure, Mike.

I'll just add, I'm going to continue the Firm's traditions in risk management and maintaining a conservative funding profile.

I'm fortunate to inherit such a talented team.

And in keeping with the times and industry, I'll apply math and software to these problems of risk management.

But continuing to do what we've always done.

And one last follow-up for you, Marty.

Coming from CIO, is that what it's about, applying math and software?

And how else can you apply your past experience to the new role?

There's math and software in everything that we do and so that's just a particular perspective we have.

But really it's risk management.

And that's what I'll keep doing as I've always done.

I've been at the Firm for a long time, worked in many of our businesses, always with an emphasis on risk.

All right, thank you.

Thanks, Mike.

Betsy Graseck, Morgan Stanley.

Hi, good morning.

Good morning, Betsy.

I wanted to ask a little bit about VaR productivity and FICC.

We've had conversations in the past where we are in a world -- or at least what we've discussed is in a rising rate with an established trend upside rate environment.

In the past you've had improving VaR productivity and I'm wondering how you think about that at this stage.

Do you feel like you've captured what you think you would capture over time, step function 4Q versus 3Q?

Or is there more to go here?

Well, I think it's difficult to forecast.

I would say the following, I think.

If rates continue to rise and it's a reflection of optimism and concerns around deflation abate and concerns around an economic decline abate and they're replaced with expectations of economic growth and activity and confidence and client sentiment continues to shift, I think there's meaningful upside in terms of the activity levels we could see in fixed income.

So we remain pretty optimistic.

Now, we're positioned for a number of scenarios, obviously, given all the steps we've taken over the years.

Whether it's risk or capital, obviously we have a lot of capacity.

And then secondly on I&L, in the equities line nice uptick Q on Q. Obviously the market overall was up a little bit, certain sectors up significantly.

I had thought that your focus in many of the activities you have is a bit more of an industrial versus a services angle.

So I'm wondering, is there some -- could you give us some color as to, on the I&L equity side, how much of that was realized versus just a mark?

And what you still have left in the bag for realizations going forward?

Yes, one thing I really want to point out because I know this question comes up about realizing and, Betsy, you asked it but everybody asks it, realized versus mark.

The most important thing is, the portfolio is always mark-to-market.

I think what you mean by realized is monetization activity.

Obviously in the past year monetization activity wouldn't have been as high necessarily as in prior years.

We don't talk to it that way as much.

The I&L balance sheet, you didn't ask it but the I&L balance sheet's roughly $98 billion.

That's down $1 billion.

And nearly 80% of it is lending-related activity.

So it's $21 billion of what we call equity.

But it's idiosyncratic and what you generally see over periods of time is the portfolio has outperformed markets because of the quality of the investment professionals and the asset selection.

But I wouldn't say necessarily that it's one category or another.

I think you're right to say that obviously industrials are representative but it's very idiosyncratic.

In a year like this where equity issuance is down, you wouldn't expect to he see lots of monetization.

Okay.

And then last on fees and asset management across the industry, been some chatter on the pressure you're seeing some industry leaders cut fees in more of the passive-oriented products.

But you could give us a sense as to how you're thinking about that business and managing it for the next several years.

I think asset management for us, among other things, also a bright spot.

As you saw, assets under supervision finished at a record, was up 10% for the year.

I think we benefit from a number of things.

I think we benefit from the fact we have a very unique private wealth franchise.

Obviously it was a mix of strong flows underneath that 10% rise.

And this reflects a couple of things.

Obviously the performance we delivered to the clients, but I do think it's the nature of the capabilities that have built over a number of years.

So I think so far, if you look at us in terms of asset flows, we're a bit of an outlier.

We benefit from scale, to your point about fees, because we're certainly not immune to the general shift in lower fees across the industry, whether it's conventional peer competitor or a competitor that's only dedicated to the asset management space.

We're not immune to that.

But we benefit from having scale in our operation and being near $1.4 trillion in assets.

Great.

I was wondering on the fee rate side, is there a bit of uniqueness you have in the high net worth client relationship versus institutional advisory.

Does that drive (multiple speakers).

We have strength in both client segments but our fees are obviously competitive with the rest of the world.

Okay, appreciate it.

Thanks.

Thank you.

Brennan Hawken, UBS.

Good morning, Harvey.

Marty, welcome to the party.

Good morning.

A quick question.

I know it's been touched on a couple times, but it's one that's definitely, I think, front of investors' minds here, so hopefully you don't mind me touching on it again.

And you've spoken a little bit about it, Harvey, with shifting policies globally leading to better dialogue which certainly is positive.

When we think about, especially here in the US, the inbound administration and the themes of the potential for reduced regulation and taxes, seems like it could have both a first and second derivative impact on Goldman.

And so not only be a direct impact on you but the clients and the clients feeling better and improved risk appetite.

So how do you think about that opportunity, assuming that plays out?

Is there a particular way in which investors should think about that opportunity?

And is there any historical context or other periods that you think are particularly relevant or helpful in trying to consider that?

I guess I'd say a few things.

I think when you say indirect and direct, you mean direct obviously.

We've been a relatively high taxpayer.

So to the extent to which tax rates come down, we're a beneficiary.

But obviously changes in tax policy can be a huge catalyst for how all of our clients think about deploying their capital strategic decisions.

And so that's Boardroom dialogue which obviously we're always front and center to.

So I think that's what you meant by direct and indirect.

So I would agree with that.

I think it's very difficult to quantify.

Just like its was difficult to quantify in 2012, 2013, 2014, how concerns around deflation and low economic growth would impact activity in a number of businesses.

I think it's very difficult to quantify how increased optimism.

We like to say in some respects confidence is the best stimulus.

And the extent to which we enter a period of increased confidence with respect to economic growth, fiscal policy, you mentioned tax policy, I think there could be a lot that happens.

Now, we'll have to see how all these policies evolve.

But who knows, we could be at the beginning of a long-term trend; we may not be.

Again, it was difficult to predict things in 2012 and how they would be in 2013, 2014 and 2015.

Yes, that's fair, Harvey.

And yes, that was exactly what I was pointing on.

Not only direct impact on you but the clients and the optimism.

Okay, that's helpful.

You've touched also on the operating leverage, so I want to hit on that a bit.

It seems like uptick in comp ratio in 2016 was probably more of a revenue story.

So want to confirm that's true.

And then when we think about the other side of that blade, or the other blade of that knife, if we start to see a revenue environment improve, how should we think about operating leverage at Goldman, given all of the work that you've done on the expense front which you've talked about a couple times?

I appreciate you recognizing the work.

Obviously over the last several years, whether it's around expenses, derisking the Firm and growing the capital ratios, returning the capital, all that work has really been about positioning the Firm, while at the same time obviously maintaining all of our connectivity to clients with really, really significant operating leverage.

This year revenue's down 9%; compensation expense down 8%.

Obviously that translates into a small uptick in the compensation ratio.

But I would say at this stage the extent to which we see tailwinds and activity and increases in revenue, we'll see that translating even more so now than we would have before, to the bottom line in terms of operating leverage.

And so I can't quantify it for you.

But if we see a big uptick in revenues, certainly you should see a decline in the compensation ratio, which of course again, is an output.

We're committed to delivering this result.

Terrific.

Thanks a lot.

Thank you.

Guy Moszkowski, Autonomous Research.

Thanks.

First question is -- good morning.

And Marty, nice to meet you.

Thank you.

Question on equities, really just a follow-up to one of the earlier questions that was asked.

You talked about that maybe there were some things that weren't quite so perfect.

I was wondering if you could characterize that a little bit further.

Were there some episodic block losses that were significant in the quarter?

Anything like that as we think about what's achievable going forward?

There were a handful of transactions, that it's always going to be the case in a market-making business when you're providing liquidity to clients, that could have an impact.

That was the case this quarter.

Some other things that are normal quarterly contributors and index rebalancings were more neutral in their impact.

Again, I wouldn't read a lot into it from quarter to quarter.

Remember, we break out equity client execution from the whole business.

That's a different level of disclosure than you're going to get from anybody else.

You should expect, given that's the line where we're most interacting with clients and capital commitments, you should expect that to be more volatile.

I just don't think any of our competitors would ever break that out, so you don't see it.

That's fair.

It wasn't the greatest quarter, but there's nothing in there.

Okay.

And I noticed that when you were doing the full-year comparison there you talked about Asia.

Yes.

For the full year but not for the fourth quarter.

So it was either more of a domestic issue in the fourth quarter or just more broadly global?

Remember, in the first half of 2015 there was a huge uptick in activity in Asia and then basically that wasn't replicated.

Our client connectivity remains as robust in Asia as ever.

But this year just not as active as it was last year.

Got it.

And then a much broader question.

I know you don't like to set ROE targets but I was wondering if in the context of what you might call, for example, unshackled interest rates in a post-QE environment, and more broadly some of the things that we've talked about in terms of the new administration's goals and expectations thereof, can you speak to a realistic but aspirational ROE?

Again, we don't set targets because it's just not the way we run the business.

We run the business through thoughtful and efficient deployment of capital, managing expenses and making sure we have the best people and we're focused on your clients.

I guess you saw some of this in the second half of the year, right?

We had two-plus quarters back to back of 11%-plus ROEs and that wasn't on a huge uptick in activity.

And again, it's one data point but it's the one I'll point to, in the first-quarter 2015 we had a 14.7% ROE.

Again, that feels like a long time ago.

We're actually more efficient now with more operating leverage now than we had then.

We feel as front-footed in terms of our franchise as we ever have.

So we feel well positioned.

We just have to see the activity.

And a final follow-up on that point about the activity level.

And I know we've had all of 10 of trading days as we get started here, so with all the necessary caveats.

How are those activity levels starting the year?

Way too early to tell, Guy.

Yes, fair enough.

Okay, thanks so much.

Thanks for taking my questions.

Thank you, Guy.

Have a great day.

You too.

Jim Mitchell, Buckingham Research.

Good morning.

Maybe we could just talk about the revenue side of regulatory change.

I know it's not an easy question to answer but I think there's been a lot of, I guess, hope and talk about an easing of regulation and what that could mean on the revenue side.

So I don't know if there's a way to talk about it generally in terms of where do you see the most constraints right now and what would potentially benefit you the most?

Whether it's easing of market-making rules, whether it's some changes like we saw in the UK around exempting cash from the leverage ratio.

If you could help, that would be great.

I wouldn't point to any one rule.

I think what we've seen, and one of the things I think that gets lost in the global dialogue around regulation is that eight years past the crisis, the body of work that's been created by the regulators, whether it's Basel capital ratios, the implementation of CCAR, stress testing broadly globally, the leverage ratios, the requirements around liquidity, all the things that were designed to address points of systemic risk, clearing, margin requirements, all of that, data reporting.

I think sometimes it gets lost in the narrative and you have to step back and look at the past eight years and realize it's an incredible body of work that regulators, the industry participants and the clients have actually created.

I think long -- I think the dialogue around regulation and whether or not there should be some degree of pause and stepping back, I think that started really at the beginning of last year, maybe a little bit before.

You saw some of that in the Basel committee across the second half of the year.

And obviously market participants, regulators, also it seems like a very reasonable point in time to step back and assess.

We obviously have gotten some great benefits out of the regulation and the question is, is there a cost in economic growth.

So this seems like a pretty normal part of the process in terms of taking a step back and evaluating it.

Now, specific rules, I don't know, we'll see what happens.

If rules change, we'll adapt, however they change.

I think we've demonstrated our ability to do that.

You don't feel there's one that's been more constraining than some others in terms of business?

No, if you actually look at our capital ratios, they're strong across the board.

Liquidity's 25% of the balance sheet.

So there's not one thing that we would look at.

I think the bigger question for all of us is it's very difficult to measure the combined impact and the interaction of all these rules and that's why it makes sense to take a step back.

That's all fair.

And a quick one on banking.

I think there's been chatter that while I think, quote, animal spirits are better and that's good for the outlook for banking, I think there's some concern at least in the near to intermediate term with policy uncertainty that might hold things back a little bit in the shorter term.

Are you seeing that?

It seems like M&A activity's continued to be pretty solid but not sure what you're seeing in terms of activity levels around short-term policy uncertainty.

Dialogue in Boardrooms remains quite high for us.

I think it's fair to say that any time you have a shift in administration which may present new policies, that can have an impact on timing of transactions because it can be a component.

But it's really, it's a timing issue.

Dialogue remains very high.

Okay.

But do you see timing being pushed out, what you're seeing?

I think it could be a little bit.

When you start having discussions around tax policy, tax policy obviously will have an implication for how people think about strategic transactions.

Again, it's an economic input into a strategic transaction, it's not the strategy itself as discussed in the Boardroom.

But it could he delay some transactions.

Remember, there's transactions coming through from the pipeline before that will be closing.

So again, I think we're just talking about a timing issue.

I actually think the environment is pretty robust in terms of dialogue.

Okay, that's great.

Thanks a lot.

Thank you.

Chris Kotowski, Oppenheimer.

Good morning.

Hey, Chris.

Hi.

On these calls, Harvey, you always talk about FICC trading activity in terms of volumes, like commodities and currencies were up and credit and mortgage down, and so on.

But whenever I speak with fixed income investors, they always bemoan the lack of available liquidity in the markets.

They complain that it's very hard to get anything done.

I'm wondering with between the increased activity that you talked about and retrenchment of some of the competitors, have bid/ask spreads moved?

Are they widening?

Or has that not yet been part of the equation?

And do you ever expect that to be part of the equation?

That's a good question.

I think you have to parse it a bit.

You mentioned commodities, so I'll pick up on commodities.

If commodity prices are going to be quite stable, let's take energy, and they're stable at a level for a period of time, that is not necessarily a catalyst for big client segments for us.

Producers of commodities, consumers of commodities, institutional investors that invest in energy, that's not necessarily a catalyst for decision making because they may have very determined levels at which, for example, a producer wants to hedge future oil production or a project that they want to bring online.

And so when you then see a big move in oil prices, one way or another, that's a catalyst for activity for our various client constituents.

In terms of liquidity, I think it's fair to say that feedback from clients, and it's not recent, it's happened over the last several years across the industry, is they feel like their ability to execute isn't what it was prior, let's say to 2008, as a period that was perceived to have almost limitless liquidity.

I think as activity picks up and volume begets volume, you get improvements in liquidity.

But every day we come in the door and we're offering our balance sheet to our clients in the best possible way that we can.

Okay.

And then as a follow-up to that, to the extent, I guess I'd say consensus expectations build in two or three rate hikes a year, at what point does that become the kind of catalyst that you talked about in relation to commodities?

Well --

For activity.

I can't predict it for you.

Again, in the fourth quarter alone, obviously if you just look at fourth quarter over fourth quarter, and I won't talk about necessarily -- obviously activity was high and it translated into an up 78% year over year for us in fixed income, but the catalysts of activity are pretty obvious, right?

You have the oil policy, interest rate shifts, movement in currencies, all those things are catalysts for activity.

I think, again, it goes back to the broad question, what's the driver of that activity?

If the expectation is more pro-growth, moving away from deflation, not inflationary, but not deflationary, more inflationary in a normalized period of interest rates, those are all positive catalysts.

What they'll be like quarter to quarter are very difficult.

But again, coming out of eight years of declining interest rates, I think none of us really wanted to get used to that.

So I think getting into a period of normalized economic growth with normalized policy and normalized interest rates, I think that would be a good catalyst over the four, for a number of years.

Quarter to quarter, though, who knows.

All right, thank you.

That's it from me.

Thank you.

Steven Chubak, Nomura.

Hey, Steven.

Hey, Harvey.

Hey, Marty.

Had a follow-up to Jim's earlier question, specifically on tax policy and the comments, Harvey, that you made on M&A.

You said that you view the changes really as more of a timing issue.

But one of the concerns that we've been hearing from a lot of folks is that efforts to broaden the tax base might in fact include restrictions on interest expense deductibility and could increase financing costs and reduce appetite for future debt.

What I'm wondering is if interest expense deductibility is in fact eliminated, reduced appetite from debt from corporates, how does that inform your outlook, not just from the M&A side, but even for DCM.

And it might even touch an corporate private equity as well.

Well, look, always puts and takes.

Obviously that would be a very significant change in policy, so would have implications for the way issuers would think, investors would think, capacity.

I think there's a lot of what's in the details around that.

But I think it's too early to tell in terms of what the necessary predictions would be.

Understood.

And sticking to changes in the GOP regime and the implications that could have, but focusing more on the regulatory side, there's been a lot of discussion on the prospects of possible repeal or less strict enforcement of Volcker.

Harvey, I know you touched on some of the changes in terms of broader messaging, but it remains to be seen how that might impact your business.

I know it's a little bit early.

But want to get a sense as to if we do see an explicit repeal of Volcker, how that would change your strategy, not just on the trading side but would it, in fact, alter how you deploy capital within I&L as well?

It's a good question.

As we've said before, we don't make any decisions before we see a rule or a rule change.

There would be no difference here.

I think most of the discussion around Volcker over the last several years by regulators and industry participants and clients, going back to the earlier question, is what impact has it had on market-making capabilities across the industry, which is obviously the most important part of our business where we're providing liquidity to our clients.

I think in terms of the micro component of Volcker, we would take a look at it.

If it changed in terms of our activities, proprietary trading, we haven't been in that business in a long time.

It was never a material driver.

And so we would look at it and what's ever in the best interest of our clients and our shareholders, that's how we would evaluate it, just like we would evaluate any rule change.

Thank you very much.

Thank you.

Matt Burnell, Wells Fargo Securities.

Good morning, Harvey.

Good morning, Marty.

First, a specific question then a larger picture question.

Harvey, could you give us the updated Common Equity Tier 1 ratios for the fully phased-in side of things?

And curious what the driver of the reduction in RWA this quarter was.

It was down about 5% quarter over quarter.

Yes.

I'll run through them both transitional and fully phased, just to level set even though I went through them before.

Under advanced, 13.1% transitional; 12.7%, fully phased; standardized again, 14.5%.

I know I said that before.

Fully phased, 14%.

On the RWAs, in advanced, $550 billion; standardized, $497 billion.

There were a number of drivers.

Again, we continue to focus on being efficient with our capital and risk reduction across a number of items.

Operational risk in advanced was down from 126 to 115 and that just reflects our continued focus on as best we can having zero operational risk events.

Obviously that's our goal.

What you're starting to see in operational risk, is you're starting to see the benefit of our focus flow through as older items roll off, albeit as you know, that's a very slow process.

And then for my bigger picture question, one of your competitors suggested that there was, on a year-over-year basis, about a mid-teens decline in European revenues.

I'm curious, first of all, if you saw that in 2016 versus 2015 in terms of the regional breakout?

And with the Prime Minister May's comments earlier this week, any update to your outlook in terms of what Brexit might or might not do to client activity more broadly across your European client base.

I have no visibility into anyone else's franchise.

The breakdown in terms of our geographic contribution of revenues wasn't materially different year over year.

Certainly no meaningful difference in our European franchise.

In terms of Brexit, as we go through Brexit, we just continue to evaluate it the same way.

This is obviously going to be a long process, so we're contingency planners by our very nature.

So we'll run through different alternatives.

I thought some of the comments with respect to trying to ensure, if not disruptive, there's a long enough runway, all those things, I thought some of those comments.

But this is going to be an evolving situation.

But I will say the sensitivity to financials and understanding the criticality in the industry across Europe, I thought all those things were pretty positive.

Again, we're going to see how this thing evolves over the next couple years.

Okay, fair enough.

Then finally, if I can, you booked your first loan in Marcus when we spoke last October.

Just wondering what the growth in that portfolio has been since then.

We booked more loans.

I'm not counting them one at a time anymore.

That just happened to be a weird coincidence with the last call.

It's going according to plan.

By that, I mean our plan of being very deliberate, growing it slowly.

Our primary focus here is on the client experience.

We believe we've built something that's differentiated for the consumer, so we're being very attentive to that, making sure we incorporate any feedback we get.

Obviously risk management's something we've done for a long time so that's a big component of this.

As we said many times, it's going to be a slow process.

Sure.

Thank you very much.

You're welcome.

Take care now.

Eric Wasserstrom, Guggenheim Securities.

Thanks very much.

Hey, Eric.

Hi, how are you?

Good.

To follow up on a couple of questions that have been raised before, but maybe taking a little more of a broader view of the balance sheet, your RWAs are now at fairly low levels as far back maybe as my model might run.

And in I&L, obviously the balance sheet there continues to decline, although you're growing Marcus a bit.

So overall what should be our expectations about GAAP and RWA growth for 2017?

And in particular, is there anything that's occurring environmentally that causes you to view that outlook differently than, let's say, three or six months ago?

That's a great question.

I think, I could be wrong on this by the way, so Dane will correct me, but I think it was 2012 we were at Investor Conference and we did our first review of some of the capital tools we have built.

And so the best way I would sum it up in terms of how we thought about the risk reduction in the capital is that it goes all the way back to 2012.

Those tools, of course, took years to develop in and of themselves.

We were just displaying them in 2012.

It's really been about evolving the Firm to understand that we need to ensure we use our capital in the most thoughtful way to deliver to our clients.

And as I mentioned before, over that period of time we've been able to grow market shares, deliver best-in-class for the industry, ROEs over a multi-year period of time.

And at the same time we sit here today with record low share count.

So the short answer after that big summary, because there's so many people involved across the Firm, in the divisions with the clients and in the federation, it's just been years of hard, hard work and a lot of elbow grease to get us where we are now.

The good thing about that is it gives us lots of capacity.

And it goes back -- when we talk about operating leverage, sure, it's about expenses; it's about capital.

But it's positioning the Firm in a way that we can respond to an uptick.

If you asked me the question can we grow risk weighted assets, I'll tell you, it would be -- it's not the scenario I've experienced as CFO, but I would wish it for Marty over the years ahead, that if he has the chance to deploy capital back to our clients, not to return as much to shareholders, grow risk weighted assets, that's actually what the Firm has done for the vast majority of Firm's history.

And those are the environments that we thrive in.

So as Marty and I pass the baton over the next couple months, I'm hoping he gets to deploy the capital in that way with all of us across the Firm.

So that's my long-winded answer.

Thanks, that's very helpful.

Thank you very much.

Thank you.

Devin Ryan, JMP Securities.

Thanks.

Good morning, Harvey, Marty.

Good morning, Devin.

Good morning.

Maybe timely with Marty and his new role here, but technology headcount's now about a third the Firm.

It's been the fastest growing area in recent years and arguably the most amount of the newer initiatives have come in this area.

So I'm going to put the cart before the horse here, but if we are moving towards more of this business-friendly backdrop where regulation's softening a bit, can you see a scenario where that trend actually changes in investment and high-tech personnel is where the incremental growth comes from?

Or is it technology growth is the secular trend versus there being some cyclical component there as well?

I'll kick off and then I'll turn it over to Marty and he can talk more specifically about technology.

I wouldn't say there's been a lack of investment in, I think the way you described it, some of the other growth areas.

We've continued to invest in all parts of the Firm, asset management, the new businesses we've talked about launching, the acquisition of an online platform.

So there's been no lack of investment.

In areas of the Firm for years where we've seen more of a multi-year decline, obviously they've been super careful as they run those businesses.

But I wouldn't describe it as we've invested in technology, we haven't invested anywhere else.

I know you weren't being that literal about it, but I just want to make sure we're clear for the call.

In terms of technology specifically, I'll turn it over to Marty.

As Harvey says, we invest in both, in high-touched and low-touched and really agnostic.

We're evolving in the direction that our clients are taking us.

As for technology, as clients have continued to transact more electronically, we've invested more heavily in those capabilities so that we can better serve them.

We have a history of that kind of adaptation.

We work with the regulators to make sure that those automated capabilities are the best-in-class.

And to the extent that the markets continue to be more electronic, technology makes our people more effective and it strengthens our clients' engagement.

Okay, great, understood.

I appreciate all that color and absolutely understand the investments spend across the Firm.

Just curious on that incremental technology spend.

But thank you.

And then within DCM, coming back to some earlier questions, had a really terrific year there.

Obviously if the M&A backdrop improves from here, that could be supportive.

On the other hand, higher interest rates it seems might constrain some issuance.

I know there's a lot of puts and takes.

I'm just curious, after such a good year how do you feel about the intermediate-term outlook there?

Do you think that we can grow from here?

Or as you think about all the moving parts, this is a tough bar?

I'd say a couple things.

First, obviously as you point out, record year in debt underwriting.

The team did an amazing job really working with clients and delivering for clients.

So quite proud of that.

The debt component of the backlog continues to grow.

That doesn't necessarily forecast this year, but the level of client engagement is quite high.

I think there's always a temptation for all of us, I certainly do it, to think of past cycles when interest rates went up, in terms of the implications for markets and the market dynamic.

This is such an extraordinary scenario that we are coming off of, basically at zero rate policy.

I think if you look at history, the rate levels are still pretty low even though the 10 year might have moved up 100 basis points at one point.

So I think if you split your question and said, well, could you end up with less refinancing, I think that's certainly a case.

But we're still in a very low rate environment by historical standards.

The extent to which we see growth, companies see top-line growth, there are CapEx activities and they're feeling confident, they want to finance, I think you could see a pretty good period for debt underwriting over the foreseeable future.

But if you saw big rate moves, disproportionate shocks for some unexpected reason, obviously that could have an impact too.

I don't think a move up in rates, in an of itself, should necessarily be considered a negative in an absolute sense.

Great, very helpful.

Thanks, guys.

Thanks.

Brian Kleinhanzl, KBW.

Thanks, good morning.

Just two quick questions.

One, in the investment management, with regards to the flows in liquidity products, you've seen those flows pick up in the fourth quarter the last two years.

Is this what you saw this quarter again, a seasonal effect with regard to liquidity products?

No, I think this has been a trend that's been in place.

We have a very big commitment to this business.

We're a scale provider in this business; it makes us very efficient in terms of an aggregator of those kind of flows.

I don't know necessarily, there's always some seasonality in these businesses, but I wouldn't -- this is a long-term commitment to this business.

I wouldn't say that it's necessarily seasonality in and of itself that's driving it.

Okay.

And then one quick one too on the European equities franchise.

Are you seeing any impacts yet from MiFID II?

What's your thoughts on long-term impacts from MiFID II as it becomes adopted?

A lot of focus on it.

Too early to tell.

Great, thanks.

Thank you.

Christopher Wheeler, Atlantic Equities.

Good morning, gentlemen.

Harvey, you've been talking a lot about capital efficiency and obviously you've been very effective in that area.

Can I ask you a question about the way forward here?

Because you've been obviously very aggressive in buying back stock and keeping the capital at very sensible levels.

But of course, you've enjoyed, or you could have say haven't enjoyed, having stock that was trading at our below book value or tangible book value for the last few years.

You've now got a situation, very happily, where you offered that 1.4 times tangible book.

I'm just wondering, I know that you want to keep the dividend at a manageable basis in terms of your payout ratio so that you don't see it swinging around in a volatile fashion.

But have you started to think about special dividends, which has been a subject that's come up, rather than buybacks which start to become dilutive?

Thank you.

It's a good question.

Just one thing you said, I thought you said something like we enjoyed buying back below book.

Just so we're clear, I never (multiple speakers).

(Laughter) Not at all.

I never found that enjoyable.

I'm always rooting for the share price and I'm rooting for our shareholders For all of your shareholders, I don't want anybody to be confused, we root for a higher trading level.

Capital management's a long-term process.

And so if you actually did the math in terms of the fourth quarter, buying back above book costs us about $0.24 a share.

If you actually did the corporate finance analytics around share repurchase versus dividends, share repurchase, because you're reducing shares and you're returning capital at the same time, are always more accretive than a dividend.

That's just the nitty-gritty math on that sort of stuff.

The bigger issue is how we want to run the Company.

We're not thinking about changing how we run the Company because of where the share price is.

We try to run the Company in the best way for our clients and our shareholders and ultimately that translates into a higher share price.

But our policy with respect to the mix being more heavily weighted to share repurchase, that has suited us quite well.

It gives us exactly the kind of flexibility we've talked about in the context of this operating leverage goal.

So that if we see a big pick-up in demand, we can deploy that capital to our clients where ultimately that's our preferred way to deploy the capital.

You shouldn't expect any change in long-term policy in terms of how we think about share repurchase relative to dividends.

Thank you.

Very clear.

Thank you.

At this time there are no further questions.

Please continue with any closing remarks.

Great.

Since there are no more questions, I'd like to take a moment to thank all of you for joining this call.

Hopefully Marty and I, as well as other members of senior management, will see many of you in coming months.

Any additional questions come up, please don't hesitate to reach out to Dane.

Otherwise enjoy the rest of your day and we look forward to speaking with you in our first-quarter earnings call in April.

Thanks so much, everybody.

Have a great day.

Ladies and gentlemen, this does conclude the Goldman Sachs' fourth-quarter 2016 earnings conference call.

Thank you for your participation.

You may now disconnect.