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