Lloyd Blankfein took aim at Goldman Sachs’ rivals on Tuesday, telling investors that his bank was producing better and more stable returns than Bank of America, Citigroup, JPMorgan Chase and Morgan Stanley.
“We are not simple, but we are simpler,” said the Goldman chief executive.
He noted that the four other banks had an average of about 190,000 staff, with an equal split between retail and institutional businesses, while Goldman has 34,000 employees, is focused on serving companies and has a balance sheet that is half the average size.
The presentation, at a conference in Miami, reflected frustration among Goldman executives that the bank’s stock has failed to outperform in recent years despite more resilient earnings.
Morgan Stanley, in particular, has benefited from selling investors a restructuring story even though its return on equity continues to lag behind its closest rival. In the past three years Morgan Stanley’s stock is up 52 per cent compared with a 22 per cent increase at Goldman, while its credit spreads have traded more tightly than Goldman’s after years of being wider on the belief that Morgan Stanley is more likely to collapse.
Goldman has bragged about its superior performance before but the presentation by Mr Blankfein on Tuesday, at a conference held by Credit Suisse, was unusual for the number of times he noted that his bank was better than or different to its Wall Street rivals.
He pointed to “a track record of lower earnings volatility than peers”.
He reiterated that Goldman was retaining businesses where it could while rivals were ceding ground. “Consider the numerous business exits that have been announced by our peers” such as shedding commodities divisions, he said.
Mr Blankfein also struck an optimistic note on the bank’s prospects, saying diverging central bank interest rate policies around the world helped make “conditions more conducive to our businesses than in recent memory”.
However, unlike some of those competitors, and contrary to the wishes of some of its investors, Mr Blankfein did not offer any profit targets in the presentation.
He offered some criticism of regulations that have put investment banks under pressure. He said aspects of stress tests could be “too redundant and too stressful” but he said investors were more impressed by the tougher regulatory scrutiny and “we’re a beneficiary of the market seeing that as a better validation”.
Ultimately, he said it would not be “whingeing” from banks that led to a relaxation of rules but the market would be affected and institutional investors would cry foul. “That will be a more credible voice than the [bank] dealers,” he said.
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