Goldman Sachs 1Q15 Earnings Call Notes

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14.7% ROE

“Net revenues were $10.6 billion; net earnings $2.8 billion; earnings per diluted share, were $5.94, and our annualized return on common equity was 14.7%. ”

The first quarter was dominated by one theme: central bank policies

“The first quarter was dominated by one primary theme, central bank policies. In the United States, the market heavily debated whether 2015 would be the year that the Federal Reserve raises rates. On the other hand, the European Central Bank announced the creation of a €1.1 trillion quantitative easing program that kicked off in March.”

Prospect of divergent monetary policies had significant impact

“The prospect of two of the world’s largest economies, implementing divergent monetary policies had a significant impact. Market participants reassess the implications for both global economic growth, and as a consequence, the performance of various financial assets.”

M&A Advisory revenues were the highest since 2007

“Breaking down the components of Investment Banking in the first quarter, advisory revenues were $961 million, the highest since 2007. This 39% increase relative to the fourth quarter reflects both the increase in completed M&A, and the strength of our leading global franchise.”

This quarter reflects numerous efforts to adjust our business

“Our performance this quarter, well just a quarter, reflects numerous efforts over the last several years to adjust our business. We sold several businesses due to regulatory capital implications. We transformed our financial profile, significantly improving our risk based capital. We revamped our capital allocation processes, improving our decision-making and efficiency. We took a hard look at our operating cost, fundamentally changing our expense structure by eliminating costs, reallocating resources, and leveraging technology. We made all these changes, while at the same time, continuing to invest in our global client franchise.”

While you were beating us up, we were spending a lot of time focused on clients

“In terms of us, through this part of the cycle, while you were beating us up, we were spending a lot of time focused on the clients and staying very-very committed to the businesses, and we are seeing it translate through.”

It’s taken years of hard work to put this operating leverage in place

“in terms of the operating leverage, this has been years of hard work, in terms of managing expenses, really thinking about how to most efficiently use the resources. And so, when you have that in place and you get the revenue uptick, obviously, its much — you can more easily translate that into the bottom line, and that’s what you’re seeing this quarter.”

The trend in banking feels like it’s still in place

“the trend in banking, does it feel like its still in place? The short answer to that is yes; when we talk to CEOs and Boards, CEO and Board confidence continues to be high, and you’ve even seen in the last couple of weeks in announced transactions, there is a fair bit of activity out there, and we feel very well placed for it.”

Our commodity business is very important to our clients

“I think it really reinforces the needs for firms like Goldman Sachs to be in a position to provide our clients with liquidity, with financing capacity, and so for us, as you know, we have been in the commodity business forever. We know how valuable it is to our clients, we are hugely committed to it.

In terms of regulation, we will see how the regulation evolves, and again, we will stay in active dialog with the regulators. But I think at this stage, everybody sees how critical it is, and how important it is to clients. That’s what I would say.”

Greece has been in view for a long time. THe environment in Europe is a lot different today than it was in 2011

” I would say, first of all Greece has been in view for a long time for folks, so people have had an opportunity to digest it. I think that, on the plus side, the environment in Europe versus 2011 is dramatically different, in terms of — if you think about the discussion around other peripheral countries relative to 2011. And so I think, those are all things on the plus side.”