Earnings Call, Interview
Goldman Sachs’ Third-Quarter Earnings
- Goldman Sachs CFO Steven Schwartz attributes strong Q3 earnings during volatile macro conditions to the firm's core intermediary model, which stands between clients seeking risk reduction and those willing to assume it.
- The firm generates revenue by making markets across asset classes (e.g., oil, gold) and facilitating capital flows, benefiting from market activity, volatility, and dissymmetry.
- Q3 performance is viewed as a direct result of strategic work over the last two years to increase market share and wallet share within both Global Markets and Investment Banking.
- Leadership and organizational changes announced recently align division heads with newly defined business segments to ensure cohesive operations and clearer accountability.
- Schwartz expresses increased confidence in the firm's ability to capture future opportunity sets, noting that a deeper client relationship base provides a buffer against economic uncertainty.
- The firm is preparing for a potentially volatile Q4 driven by a complex backdrop including the U.S. election, prolonged low interest rates, the pandemic's trajectory, and the LIBOR transition.
- Resource deployment (capital, liquidity, and risk units) has been calibrated to remain competitive for clients who will likely require assistance during anticipated market turbulence.
- Schwartz notes the firm is only 10 days into Q4, with the potential for significant volatility events to occur between the current date and year-end.
- Forward-looking strategy for 2021 focuses on two pillars: maintaining strength in "big incumbent" businesses and scaling new initiatives like transaction banking, consumer business, and fundraising alternatives.
- New business lines are positioned as value-adders to the core franchise rather than substitutes intended to compensate for weaknesses in incumbent sectors.
- The overarching strategic goal for 2021 is to execute on these plans without the distractions that characterized the 2020 operational environment.