Cautionary Note on Forward-Looking Statements

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Transcription:

Cautionary Note on Forward-Looking Statements Today s presentation may include forward-looking statements. These statements represent the Firm s belief regarding future events that, by their nature, are uncertain and outside of the Firm s control. The Firm s actual results and financial condition may differ, possibly materially, from what is indicated in those forwardlooking statements. For a discussion of some of the risks and factors that could affect the Firm s future results and financial condition, please see the description of Risk Factors in our current annual report on Form 10-K for our fiscal year ended December 2010. You should also read the information on the calculation of non- GAAP financial measures and the impact of Basel III that is posted on the Investor Relations portion of our website: www.gs.com. The statements in the presentation are current only as of its date, June 2, 2011. 1

Goldman Sachs Presentation to Bernstein Strategic Decisions Conference Gary Cohn President and Chief Operating Officer June 2, 2011 2

Nimble Allocation of Resources Key Themes Resources Balancing Opportunities Global Economic Growth Expansion of Capital Markets Increased Regulation Developed vs. Growth Markets Existing vs. New Business Lines Increased Capital Requirements Infrastructure vs. Production 3

Case Studies of Dynamic Changes Digitization of the Equity Markets Decimalization in 2000 and Regulation NMS in 2005 Impact on business Commission rates and spreads declined However, since 2000, GS volumes have increased 3x while headcount fell 50% Invested in technology to achieve operational efficiencies and generate market share gains Foreign Exchange Electronification Electronic spot FX platforms for interdealer trades created in 1990 and dealer-client platforms followed in the early 2000s Impact on business Profitability per trade compressed Volumes have risen at a 20% CAGR while front office headcount flat Investment in technology generates margin expansion Nimble allocation of resources and investment in technology drives performance in dynamic markets 4

Future Market Focus Market Focus Clearing Price Transparency and Automation Activity Limitations Capital Liquidity 5

GS Perspectives Clearing Goal is to increase transparency and standardization to reduce systemic risk Market Positives Reduces systemic risk; moves bilateral risk to central clearing Standardized credit terms level the playing field Market Negatives Potential for risk concentration Spread tightening GS Considerations Currently $11bn of Basel III counterparty credit capital charges for OTC products GS proprietary technological infrastructure in place Strong clearing franchise today Among largest futures clearers globally Leading prime broker 6

GS Perspectives Price Transparency and Automation Push for greater transparency and standardization will result in greater automation FX Electronic Trading 1 CAGRs 05-10 Equities Electronic Trading 2 CAGRs 03-10 Market Positives Deeper liquidity 42% FX Volumes 11% Revenues 1 FX business includes G10 currencies 13% 5% Equities Volumes Revenues Enhanced market participation Increased volumes More efficient risk management Increased opportunity to innovate Market Negatives Lower margins Barriers to entry GS Considerations Poised to benefit from market share consolidation Primarily impacts credit and rates derivatives trading Electronic trading is 53% of FX volumes compared with 23% 5 years ago 2 Equity electronic trading corresponds to Equity Commissions and Fees 7

GS Perspectives Price Transparency and Automation Development of ETF Market Equity Volumes (Shares, bn) ¹ ETF Volumes (Shares, mm) 2 8,517 964 2,974 20 2000 2010 2000 2010 Automation of the Equity Markets has coincided with continued innovation 1 2000-2003: NASDAQ, Market Systems Inc.; 2004-2011 Goldman Sachs 2 Bloomberg 8

GS Perspectives Long-Term Investing Implementation will reduce both earnings volatility and capital requirements Market Positives Lowers volatility Reduces capital charges Could improve ROE Market Negatives Inability to invest at the level that clients would prefer Lost revenues GS Considerations Not a meaningful business driver Roughly 10% of revenues since our IPO ~$9bn in capital 9

GS Perspectives Capital Reduction in systemic risk but international harmonization is critical Estimated GS Basel III Tier 1 Common Ratios 1 7% 8% 11% Basel III Floor GS 1Q11 Estimate 2012YE Estimate Market Positives Stronger industry-wide credit profiles Reduces systemic risk Promotes more rational risk/return decisions Market Negatives Increases cost of credit extension in the system, potentially hampering economic growth Potentially lowers returns GS Considerations Potential for active significant mitigation well in excess of conservative scenario Credit correlation and mortgage securitization positions represent $12bn in Basel III market risk capital requirements With a pro-forma 8% Basel 3 Tier 1 Common ratio today, GS is well positioned for changes ¹ 2012 projected ratio includes contractual roll-off of our correlation portfolio, expected duration of our mortgage securitization book, and forward earnings at consensus estimates as of 1Q11 10

GS Perspectives Liquidity Average Global Core Excess ($bn) ¹ Market Positives $163 $170 $168 Reduces systemic risk Market Negatives Higher cost of doing business $111 GS Considerations GS Liquidity Coverage Ratio (LCR) compliant today Long history of maintaining excess liquidity position ~$2bn cost in 2010 4Q08 4Q09 4Q10 1Q11 B/S % 13% 19% 19% 18% Existing proprietary tech/modeling capabilities Sophisticated liquidity risk management systems ¹ Beginning with the fourth quarter of 2010, the GCE, which was previously reported at loan value, is now reported at fair value 11

GS Perspectives Potential Offsets Areas of Focus Clearing Price Transparency and Automation Activity Limitations Capital Liquidity Strengths Business Diversity Leveraging Technology Balance Sheet Flexibility M&A at Depressed Levels Global GDP Growth The market is discounting business opportunities and Goldman Sachs flexible business model 12

Business Diversity Fixed Income Fundamental Equity Quantitative Investment Strategies AIMS Direct Alternatives PWM M&A Equity Underwriting Debt Underwriting Debt Fund Investments Direct Lending Equity Fund Investments ICBC IMD Hedge Fund Investments Other Long-Term Investments I&L GS Business Breakdown 1 IBD One Delta Shares Program Trading ETF Futures Derivatives Index Volatility Single Stock Volatility Structured Products Convertibles IMD Equities FICC Client Execution QT/Specialists Quantitative Trading NYSE DMM ETF Specialists Global Fund Products Prime Brokerage Clearing Reinsurance Rates Swaps Governments Agencies Inflation Volatility Exotics Passthroughs Asia FX Hybrids Short Term Interest Rates Mortgages Agency RMBS Non Agency RMBS Non Resi ABS CMBS CDOs Residential Loans Europe Trading Emerging Markets EM Credit EM Rates EM FX EM FX Options EM Exotics Foreign Exchange G10 Spot/Forward G10 Options/Exotics NJA Macro Commodities Crude Oil & Derivatives Natural Gas Power European Gas, Power, Coal Emissions & Uranium Australia Trading Metals Investor Products Commodities E- Trading Agricultural Products Credit Fundamental Credit Structured Credit Euro Flow Trading Asia Single Names Bank Loans Municipals Correlation Portfolios US Franchise CLO Euro Franchise CLO CLO Retained US Exotics 1 GS Average Quarterly Revenue Contribution 1Q08-1Q11 13

Leveraging Technology Market Shifts Technology Platform Development Equity Decimalization SIGMA / REDI Trader FX Electronification FXall (Multi-Dealer FX) / REDI Trader Treasury Market Electronification Tradeweb (Multi-Dealer Fixed Income) Commodities Futures ICE 14

Balance Sheet Flexibility GS Level III Assets (% of Total Assets) Goldman Sachs has a long-term focus on maintaining the liquidity of our Balance Sheet 8.1% 6.4% The amount of liquid assets we hold allows us to: 5.1% 4.9% Respond rapidly to dynamic change $96 Nimbly reallocate inventory Maintain solvency and profitable business mix $59 $45 $46 1Q08 1Q09 1Q10 1Q11 Level III Assets ($bn) Level III as % of Total Assets 15

M&A at Depressed Levels Global Announced M&A as a % of Market Cap 1 $5 11.1% 12% Global Ann. M&A Volume ($tn) $4 $3 $2 $1 5.9% 7.7% 9.9% 9.4% 6.5% Average 7.0% 5.6% 5.4% 4.5% 6.8% 7.5% 7.5% 9.4% 4.6% 4.9% 5.7% 10% 8% 6% 4% 2% Ann. M&A Vol as % of Global Market Cap $ 0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011A Announced M&A Volume as a % of Market Cap Average '96-'11 1 Source: Thomson. 1Q 11 volume data adjusted for government transactions and presented on an annualized basis 16

Asset Management Growth Drivers and Opportunities Firm Rank Total AUMs ($tr)¹ Growth Drivers $3.6 Fiscal stability Capital markets development $2.1 $1.8 $1.6 $1.6 $1.3 $1.2 $1.2 Rising individual wealth $0.8 $0.8 Large and growing pools of capital BlackRock State Street Vanguard Fidelity Allianz JPM Capital BNY Mellon GS DB Global footprint to benefit from GDP growth ¹ AUM data as of December 31, 2010. Ranking and data represent third-party assets under management, excluding assets managed on behalf of corporate parent / insurance subsidiaries. Deutsche Bank Asset Management excludes Private Wealth Management invested assets 17

Revenues vs. GDP Relationship Growth Multiple 2001-2010 GS Geographic Revenue CAGR vs. Nominal GDP CAGR 1 Chasing global GDP growth allows us to maximize our returns GS revenues have grown at a multiple of GDP growth 1.4x 1.6x 1.7x EMEA Americas Asia ¹ GDP data per Goldman Sachs Global Investment Research. Americas includes the US, Canada and Latin America. EMEA includes the EU 27, Russia, Egypt, Israel, South Africa, and Turkey 18

GS Perspectives Potential Offsets Areas of Focus Clearing Price Transparency and Automation Activity Limitations Capital Liquidity Strengths Business Diversity Leveraging Technology Balance Sheet Flexibility M&A at Depressed Levels Global GDP Growth The market is discounting business opportunities and Goldman Sachs flexible business model 19

Goldman Sachs Presentation to Bernstein Strategic Decisions Conference Gary Cohn President and Chief Operating Officer June 2, 2011 20