Goldman Sachs 4Q14 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

Global economic challenges in 2014

“If we take a step back and assess 2014, there have been challenges to the global economy and therefore the operating environment for our clients.”

When you see that much pressure on credit markets…

“I don’t think when you look back in the fourth quarter, any of this should be particularly surprising. When you see that much pressure on credit markets, in terms of the ability as a market maker on the course of the quarter, to manage liquidity, I don’t think its particularly surprising, particularly the stress that came under high-yield as a result of the energy decline. ”

If things can stay here, it seems like a reasonable environment

“But it does feel like at least if the marketplace and asset prices can stay here, it feels like a reasonable environment to me for the coming year. But again these things can change on a dime.”

Our commodity franchise is about hedging for our clients

“In terms of our commodity franchise, which we’re as you know very committed to. The focus there is on the hedging of commodity price exposures and working with all those clients globally whether they be corporates or investors. And so that’s really how we think about the strategy. Obviously ownership of physical commodities is getting — we think is actually a good review by the Federal Reserve. We are very focused on safety and soundness. We think its perfectly understandable that they’re doing the same. But that’s our strategy in commodities.”

Oil price declines create opportunities

” As it relates specifically to the industry, if we go through a period of sustained declined prices around this level, then clearly its going to put certain parts of the industry under stress. There will be opportunities to help those clients, work through those stresses. There will be opportunities to deploy new hedging strategies, there will be potentially merger opportunities as the organization works through what is really a case of excess supply.”

You can’t draw conclusions about liquidity in credit markets quite yet

“It will be very difficult to anticipate whether or not this is kind of a new credit regime in terms of liquidity trading or it is — these are sort of one off factors. Its always hard to assess that when you’ve had multiple years of timing credit spreads, very low default rates. I will say when you look to the data I don’t have it on top of my head particularly in Europe where liquidity was little challenged in the third quarter and then it got worse in the fourth quarter. I think because if market moves in terms of price movements they were pretty significant. More significant than you would have thought in terms of the underlying credit itself. And so clearly liquidity played a role in terms of the degree of price movement. But I wouldn’t say at this stage you could draw any firm conclusions from that in terms of any long-term structural changes.”