Harvey Schwartz, Goldman’s CFO, said the firm is suddenly experiencing some “recruiting tailwinds”, with more people wanting to work there…At the same time, Schwartz said Goldman’s staff are still very much in demand to work elsewhere, claiming that “Goldman Sachs people are always in high demand and our competitors are always looking to take them over to their firms.” [eFinancial]
Everybody Wants Somea This
GS had earnings today and I guess they weren’t that good but all anyone ever wants to talk about on earnings calls these days is leverage ratios. That I suppose is a sociologically interesting fact: is banking a business of selling stocks and bonds and loans and whatnot, or is it a business of optimizing yourself around regulation? You can tell what the analysts think, though I suppose that’s like a second derivative; they want to add value to whatever was already obvious to the market. The stock price dropped on, like, not selling enough stocks and bonds and whatnot. Or rather: on making too much money from owning stocks and bonds with Goldman’s own capital, and too little on doing more obviously Volcker-compliant-y things. So: still sort of a regulatory question I guess.
But, yeah, all the analysts want to talk about is leverage ratios, and you know who does not want to talk about leverage ratios is Harvey Schwartz. Delightfully someone at Reuters counted the number of times he was asked to quantify Goldman’s leverage ratio (eight1) and the number of times he did (zero). He said he was “comfortable” with it, which presumably means that GS will be above 5% by 2018 assuming some rates – possibly at, above, or below the current rates – of capital generation and capital return. But they haven’t done the math yet.
Which is curious? Read more »
Honestly bank earnings week has been a little boring, no? It’s been quarters since anyone announced a six billion dollar trading loss, and the recent news is pretty much modest beats from a diverse mix of businesses and where is the fun in that I ask you. Financial-market memories are short and … have negative serial correlation, or something … which might explain why Goldman is down today despite announcing a $4.29 EPS vs. analysts’ $3.87, with strength in principal investments and debt underwriting making up for so-so FICC revenues.
The call: variations on boring. Goldman CFO Harvey Schwartz painted a picture of Goldman clients who are deterred from strategic activity by macro uncertainty – “oh we can’t do that merger, because, uh, Cyprus” – and so spend their time refinancing their loans every six months to get lower interest rates.1 I suppose their bankers have to make fees somehow. And there don’t seem to be many conclusions to draw from the numbers: FICC revenues are down because there is noise in FICC revenues, not due to any change in business mix or performance. VaR is down because market vols are down, not because of any change in risk appetite. Private equity gains in investing & lending reflect stronger public equity markets because private equity is just beta. I guess.
Nor is Harvey your go-to guy to fulminate about regulation, though these days really no one is. He said various nice things about how the regulators are working hard and getting it right, and how Goldman doesn’t act in anticipation of regulations but only responds to them when they’re final. Others have phrased this less charitably. Thus Goldman’s new BDC is not a preemptive effort to fit prop traders into the Volcker Rule, but just a client-driven part of Goldman’s asset management strategy – “deploying our competencies into opportunities we feel like our clients would benefit from.”
So what’s left? There’s comp, of course: comp accruals were 43% of revenue ($4.34bn), versus 44% in 1Q2012 ($4.38bn), and headcount is down 1%. Analysts tried to push Schwartz to extrapolate a trend there, but again he mostly resisted. Keep enough people to serve clients, etc. Read more »
You can look at Goldman’s results from a variety of distances. Up close, EPS estimates were $2.28 and actuals were $2.85 ($3.33 ex-DVA); $2.85 is more than $2.28 and there’s a dividend increase to boot so, yay there you go.
In the middle distance, you could have some concerns. Core, recurring revenue growth was so-so relative to peers, and costs were high, partly due to pleasing comp accruals, which I guess could concern you if you were a mean ungrateful shareholder and/or a former Goldman employee who for whatever reason is no longer accruing said accruals. Most of the outperformance came from appreciation on investing and lending positions.1
In the far distance, what do you make of it? The most awkward moment of the call for me was when the UBS analyst asked the CFO tag team to try to give him a sense of future Investing & Lending profits. You can’t do that! Investing & Lending is like the stochastic slush fund; revenues were $1.8bn this quarter versus $200 last quarter and ($2.5bn) this time last year. If you could predict those revenues you shouldn’t be a banking analyst. The tag team went like this, paraphrasing wildly: Read more »
What do you know about soon-to-be Goldman Sachs CFO Harvey M. Schwartz? Probably not much, but luckily Bloomberg profiled the guy today and came back with a couple moderately amazing tidbits about David Viniar’s successor. Such as one, the fact that he likes his women with some gunshot wounds on their bones (“Schwartz…lives with Annie Hubbard, whom he met in 2003, a year after she was shot helping subdue a hostage-taker at an East Village bar”) and two, to date he is the only known Goldman Sachs executive to play a role in a chick lit novel that went on to become a major motion picture (Jon Winkelried’s cameo in The Notebook, which was left on the cutting room floor, sadly does not count). Read more »
Back in 2009, Goldman Sachs Chief Financial Officer David Viniar, whose face may not be as recognizable to you as that of Lloyd’s but whose voice you’ve likely found just as if not more soothing each time you hear it during the firm’s earnings calls, decided he was ready to move on after a three-plus decade long career with The Firm. Normally, that would have been just fine; people would have wished Viniar all the best as he happily waved good-bye to all his colleagues and friends from the gondola lift made of fluffy clouds and money that transports all Goldman Sachs executives to retirement.
Unfortunately for DV, however, it was around the time that he started to think about leaving that Goldman hit some unfortunate rough patches that included “a civil fraud suit by the Securities and Exchange Commission over marketing of mortgage-related securities, a federal criminal probe on the same matter, and a civil suit brought by a hedge fund that bought a Goldman CDO.” And while other higher-ups– no names: Jon Winkelried– would have thought nothing of abandoning Lloyd in his time of need or what kind of message it would have sent that a top official was calling it quits, David “Bones” Viniar is a little more loyal than that. Lot more loyal in fact (“He’s so loyal he’s only going to do anything when the timing is appropriate,” one person said at the time, adding that “David will do whatever the firm asks of him”) and so he stayed. Stayed by Lloyd’s side during his darkest hour. Stayed when the Goldman needed him most. And although some might have hoped he’d forget about wanting to leave; that he could be tricked into staying “just one more year” and another and another and another after that; that that good-bye he put on hold would stay on hold forever; that, if all else failed, Gary Cohn could physically prevent DV from leaving by putting him in a sleeper hold with his legs…that good-bye has come. Read more »