Goldman Sachs' Q2 Earnings...Decarbonization and the Race to Net Zero...Equity Outlook for the Second Half of 2021

[Goldman Sachs]( [BRIEFINGS] July 15, 2021 Goldman Sachs' Second-Quarter 2021 Earnings Above (L to R): Stephen Scherr and Carey Halio of Goldman Sachs This week, Goldman Sachs reported its second-quarter 2021 earnings results. Per-share earnings came in at $15.02, bolstered by strong client activity and engagement. “Our performance underscores the strength of our client franchise and the constructive but more normalized market environment relative to a year ago,” Goldman Sachs Chairman and CEO David Solomon told investors during the firm’s second-quarter earnings call. On an episode of The Daily Check-In, Chief Financial Officer [Stephen Scherr]( reiterated the importance of client engagement. “There's no substitute for physical engagement and proximity...to our client set and for engagement broadly,” Scherr says. “The level and nature of client engagement, which was extraordinary during the deepest moments of COVID as we stayed quite connected to our client base, is now manifesting itself in more physical meetings and engagement.” Meanwhile, in a [video shared with investors]( Carey Halio, global head of Investor Relations, explains why she is encouraged by the firm's performance. “We’re improving wallet shares, broadening the client footprint, delivering One Goldman Sachs and operating more efficiently,” Halio says. [Watch Daily Check-In video]( [Read earnings press release]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Goldman%20Sachs'%20Second-Quarter%202021%20Earnings&body=https%3A%2F%2Fyoutu.be%2F0_-Wp4Zcoj8) Race to Zero: Why Companies Are Decarbonizing Now Above (L to R): John Greenwood and Cindy Quan of Goldman Sachs The financial pressure on companies to decarbonize is growing by the day, explains John Greenwood, head of the new Decarbonization Group in the Investment Banking Division, on an episode of Exchanges at Goldman Sachs. “There has been an increased focus now from institutional investors to actually embed ESG into their investment decisions,” he says. “What that means is that there is now a direct financial impact for corporate clients that do not embed decarbonization into their core business strategy.” It could raise their cost of capital, lower their valuation and even hurt their recruiting efforts. “A lot of new recruits are looking for companies that truly value what the impact of the company is on the broader environment,” says Cindy Quan, a vice president who leads corporate conversations for the Decarbonization Group. "On the people side of ESG and sustainability, companies are realizing [those initiatives are] a great way to recruit and retain human capital.” [Listen to podcast]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Race%20to%20Zero%3A%20How%20Companies%20Are%20Deploying%20Decarbonization%20Strategies&body=https%3A%2F%2Fyoutu.be%2FBevQFImaOHc) 2021's 'Stellar' Stock Market: Will It Last? After “stellar” equity market performance in the first half of the year, the outlook for the second half also looks robust, explains John Storey, head of Goldman Sachs’ equities franchise in EMEA. “What we're seeing is corporate earnings performance, guidance and confidence are very strong,” Storey says in an episode of The Daily Check-In. Whether the market rally lasts, however, depends on the underlying strength of the economy and a continuation of accommodative policies, he notes. “So much of the thesis hinges on whether inflation spikes are transitory or more permanent.” [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=After%20a%20%E2%80%98Stellar%E2%80%99%20First%20Half%20in%20Stock%20Markets%2C%20What%E2%80%99s%20Next%3F&body=https%3A%2F%2Fyoutu.be%2FeDdNjBJE76A) Spencer Stuart Leader: Top Performers 'Redefine' Jobs Above (L to R): David Solomon of Goldman Sachs and James Citrin of Spencer Stuart What separates top performers from everyone else? They don’t just do their job, says executive recruiter James Citrin—they redefine it. As the leader of Spencer Stuart’s North American CEO practice, Citrin has studied high-performing employees for more than 20 years. And in a recent episode of Talks at GS with Goldman Sachs Chairman and CEO David Solomon, he reveals the secret of their success. “Most people in the world define their success or their jobs as: You have objectives and your job is to meet your objectives. That’s what creates average performance.” He adds that strong performers “exceed their objectives,” but what about the top one percent? “They actually redefined their job...They don’t just do more of the same,” Citrin says. “They think about ‘what can I do that will actually add value to my organization[?]’...and then they initiate that in order to add value in unexpected ways.” [Watch video]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Spencer%20Stuart%E2%80%99s%20CEO%20on%20Defining%20the%20Top%20Performers&body=https%3A%2F%2Fyoutu.be%2Fgsesh2aH5kQ) Briefly: Normalcy Returns to European Banks During last month’s Goldman Sachs European Financials Conference, executives from major European banking, insurance, real estate and diversified financials companies joined policymakers, regulators and investors to discuss the hot topics of the day. Jernej Omahen, head of the European Financial Institutions Group for Goldman Sachs Research, sat down with us to share his main takeaways from the virtual event. Jernej, what was the overall sentiment about the region’s economic recovery and the impact on banks’ operations? Jernej Omahen: In the context of the past 12 months, there has certainly been a sense of optimism about the return to some form of normalcy, a view expressed especially by management teams. Policymakers also expressed cautious optimism. And it’s straightforward to see why: We’ve had an improvement in capital positions, strong credit quality and a step-up change in profitability, all of which seem sustainable in 2021. Many in the community have their eye on September 30 of this year—the date when the European Central Bank might repeal its restriction on banks’ ability to pay cash dividends to shareholders and partake in buybacks. What do executives and investors think is in store for dividends? Jernej Omahen: There is a broad expectation that dividend restrictions will be lifted, and we’ll see a return to a normal supervisory cycle. Bank executives spoke positively about the likelihood of dividend payouts resuming and see upside potential for payout ratios. Buybacks were a frequent discussion point, even with banks that have not used the instrument in the past. Investors, on the other hand, wanted to know whether the ECB is likely to ban dividends again when the next crisis strikes. While policymakers insisted that the restriction was a one-off measure, it’s clear that the risk investors associate with European banks’ dividends has risen, and it will take a long time for them to perceive bank dividends to be as predictable as those in other major sectors. What’s next for regulation? Jernej Omahen: It seems to us that the process of “classic” regulatory tightening is over. Banks have emerged resilient from the current crisis, which in turn sharply diminishes the case for incremental tightening. The imminent implementation of Basel 3—the third installment of the Basel Accords developed to address the regulatory deficiencies revealed by the financial crisis—is broadly seen as the last large piece of the market regulation puzzle and should not result in a material increase in capital requirements. That said, many expect the next regulatory wave to be ESG-related. It is still unclear what shape this “Green Basel” will take, but we expect it to continue to be a focus in the future. What’s the outlook for M&A activity in the sector? Jernej Omahen: The M&A debate focused primarily on domestic opportunities and seemed limited to the more fragmented south European markets. Bank management teams remain dismissive about cross-border M&A, even as policymakers continue to advocate the benefits of cross-border banking across the Eurozone. Large banks that boast “national champion” positions are focused on getting through the crisis and growing their market share. Demonstrating the ability to return capital to shareholders and re-establishing themselves as reliable income investments takes precedence over M&A. [Read more Briefly Q&As]( SHARE: [twitter]( [facebook]( [LinkedIn]( [email](mailto:?subject=Takeaways%20from%20the%2025th%20European%20Financials%20Conference&body=https%3A%2F%2Fwww.goldmansachs.com%2Finsights%2Fseries%2Fbriefly%2Findex.html) Goldman Sachs Media Highlights CNBC - July 13 [Goldman Sachs’ Solomon: Market Is Pulling Forward Some of the Recovery]( (3:21) CNBC - July 12 [U.S. and Europe Remain in a ‘Sweet Spot’ of Growth, Says Goldman Sachs]( (3:18) Bloomberg - July 9 [Goldman Sachs Sees Less Risk of Rapid Markets Repricing]( (2:34) [Subscribe]( [Unsubscribe]( The data provided in this newsletter is for information purposes only and should not be construed as investment or tax advice nor as a recommendation to buy, sell, or hold any particular security. Goldman Sachs believes the data in this newsletter is accurate, but does not verify its accuracy independently and does not warrant or guarantee that it is accurate or complete. Goldman Sachs has no obligation to provide any updates or changes to the data. No investment decisions should be made using this data. To the extent this newsletter includes material from the Goldman Sachs Global Markets Division, please click [here]( for information relating to Global Markets Division material and your reliance on it. To the extent this newsletter includes material from Goldman Sachs Asset Management, please click [here]( for additional disclosures. © 2021 Goldman Sachs, All rights reserved. 200 West Street, New York, NY 10282, USA [GS.com]( | [Careers Blog]( | [Privacy and Security]( | [Terms of Use]( [Facebook]( [Twitter]( [LinkedIn]( [YouTube]( [Instagram](