Goldman Sachs 3Q14 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. Full transcripts can be found at Seeking Alpha

Goldman’s foundation

” Our success begins with a fundamental approach of engaging our clients, understanding their challenges, and then addressing their needs. That is the foundation for expanding the breadth and depth of our existing relationships and the basis for building new ones. ‘

GS’ balance sheet has changed dramatically since coming public in 1999

“We went from $250 billion in assets in 1999 to $1.2 trillion in 2008, and then back to $870 billion today. And along the way, we made Goldman Sachs a stronger firm. We increased our common equity from $10 billion to over $70 billion. And substantially increased our liquidity pool, which now sits at $180 billion.”

This week’s trading reminds us how fragile markets can be

” just before I take your questions, I would like to make one additional closing comment about the market environment we’ve seen over the past week, and particularly yesterday and this morning. It’s clearly an environment that reminds all of us about the power of investor sentiment and how fragile it can be at times. Yesterday in particular, it’s clearly a mark in the morning where investors were, quite frankly, shooting first and asking questions later. We have seen this market reaction in the past, and while painful, it’s somewhat a normal part of how markets function.”

From our economist’s point of view, nothing material has changed

“Clearly, investors are now debating whether we will see lower rates for longer, and more importantly, whether the global economy is slowing or continuing to grow. These are questions that the market has certainly debated before. We have always believed that over the long-term, markets follow fundamentals. And speaking with our economist only yesterday, they would argue that nothing has fundamentally changed the past few weeks, or certainly the last 24 hours, regarding the long-term outlook for the global economy. That doesn’t mean it will continue to grow, but it certainly doesn’t mean it will stall.”

The collective impact of all of these rules is enormous

“Again, the impact of the collective rule sets of all the rules: balance sheet, leverage, risk-weighted asset, liquidity, it’s pretty enormous. And I don’t think we can only have positive effects from that over the next three, four, five, 10 years. I wish that was case.”

The last 48 hours has been concentrated position liquidation

“And so I think there’s healthy periods of volatility and less healthy periods. And really what we’ve seen in the last 48 hours is concentrated position liquidation, obviously triggered by stop-loss selling in multiple markets, and at times, as we’ve always seen, selling can begat selling.”

A very interesting thought on M&A advisory vs. Goldman’s personal take on M&A

” I think we are the leading merger and acquisition advisory firm in the world. It would be somewhat inconsistent philosophically for us; I just think it would be inconsistent with our core being if we said we weren’t willing to consider acquisitions. And so I think you should assume philosophically and culturally that as a management team we would consider any acquisition if it was accretive, in any area of our firm. I do think that as you point out, I do think that the ongoing nature of the regulatory environment probably just make that more difficult for the industry generally. But we’ll see over time. But we’re always open-minded. Having said all that, I think we’ve benefited us as a firm over many years by keeping our culture intact and doing nothing major. But you have seen us do bolt-on acquisitions from time to time. So – but that’s how I would describe the philosophically.”

Volcker is not affecting market liquidity at this stage

“o I just want to be clear, because I thought – you may have misheard me or I may have misheard you. There’s nothing that I saw about Volcker compliance that I think is, at this stage, preventing people from providing liquidity. Volcker has been pretty visible for a while now.”