Earnings Call, Investor Day, Conference Presentation, Panel
Fixed Income Investor Relations - Goldman Sachs 2020 Investor Day
- The firm aims to shift its unsecured funding mix toward deposits, targeting a 50-50 split between deposits and debt, with plans to grow total deposits by $100 billion over the next three years across U.S. and U.K. channels including transaction banking and brokerage.
- Cost optimization strategies include increasing the proportion of unsecured funding from deposits, which is estimated to save approximately $80 million annually in interest expense for every $10 billion of wholesale debt replaced, with a combined medium-term expectation to reduce interest expenses by $1 billion through funding mix shifts and ALM enhancements.
- The weighted average maturity (WAM) of wholesale debt is expected to be modestly shortened to align with a diversified funding strategy and fee-based revenue growth, while maintaining the flexibility to reduce liabilities in line with assets.
- Long-term liquidity pool recalibration is anticipated to potentially extend duration and increase yield on Global Core Liquid Assets (GCLA), offering a revenue upside of $200 million annually for every 10 basis points in yield improvement, though this is excluded from current forecasts due to a conservative stance.
- The firm expects to transition away from LIBOR by the end of 2021, committing to a seamless process while actively providing liquidity to the SOFR marketplace in coordination with global central banks and regulators.
- Capital and liquidity management will remain dynamic rather than targeting specific forward metrics for the Liquidity Coverage Ratio (LCR) or LCR reduction, which is contingent upon the evolution of unsecured funding into deposits and stable fee-based revenue growth.
- Deposit acquisition strategies focus on the U.S. and U.K. retail markets, with an expectation of continuing to raise at least $10 billion annually; the firm does not view Europe and Japan as currently attractive deposit markets due to the international rate outlook.
- Future capital deployment includes potential calls to replace preferred stock based on regulatory rule sets and the final SCB rule, alongside a dynamic evaluation of shareholder returns versus business investment.
- Market outlook includes an expectation that there will be no recession in 2020, though the firm is preparing through risk modeling and recession scenario planning, while remaining attentive to Fed IOER changes and potential impacts from the coronavirus.
- Deposit rate strategies involve testing and learning to remain competitive without becoming top-of-market for rate-sensitive deposits, aiming to enhance customer stickiness through new product features and ensuring more than 90% of online direct retail deposits are insured.
- Growth initiatives include a focus on expanding the retail footprint and transaction banking services in the U.S. and U.K., with no immediate plans for international expansion, while remaining open to opportunistic platform acquisitions or partnerships that avoid paying a deposit premium.
- Potential issuance of green bonds or sustainability-linked instruments is under consideration, pending the assurance of certification processes and ongoing monitoring capabilities.