The Goldman Sachs Group, Inc. (NYSE:GS) Q2 2017 Earnings Conference Call - Final Transcript

Jul 18, 2017 • 09:30 am ET


The Goldman Sachs Group, Inc. (NYSE:GS) Q2 2017 Earnings Conference Call - Final Transcript


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Q & A

(Operator Instructions) Glenn Schorr, Evercore ISI.

Glenn Schorr

So I definitely heard all the commentary on FICC, and I think commodities is one of the things that stands out, that makes you different than the others. But maybe we could talk about mix of clients and how much that adds to maybe the differentiated performance that we're seeing, meaning you seem more volatility dependent, right, we've talked about in the past. And when VaR's low, you're (inaudible) more than others.

Is there anything that Goldman can do to broaden the mix of both clients and products to be less volatility dependent? In the past, you have a relationship with Sumitomo that brought a bigger lending mix. I'm just thinking out loud.

Martin Chavez

Sure, Glenn. Obviously, that's the -- a question on our minds as well as yours. And so to step back for a moment, while there are nuances and everyone's franchise is a bit different, as we all know, our franchise emphasizes providing liquidity to active asset managers. So it really isn't just a question of low volatility, it's more a sequence of low volatility, less dispersion, less client activity, reduced opportunity set and lower revenues.

Also, as you mentioned and I mentioned in the prepared remarks, we have a leading commodities business, which has a greater weight in our franchise than in other franchises. And it was a challenging backdrop where commodity is really challenging on all fronts. And in addition, while it was a potentially better business environment for mortgages year-on-year, we have a smaller weight of mortgages in our franchise. So those are some effects that are likely there.

To get to the second part of your question on actions that one can take, I can tell you that everyone in our FICC post business is intently focused on this topic and at a granular, molecular level, working on it, as are all of us in the leadership team. So much of it is blocking and tackling. So in no particular order, we're looking to see where potentially there are gaps in our client coverage and onboard new clients and serve them.

Also, the ongoing question in every business, generally, is how do we do better with the clients who are already clients of the firm? How can we cover them better? How can we have a greater impact with them? How can we provide them new solutions to their challenges? And that is really an iterative process of communicating with the clients. Our business starts and ends with them. And so it's communicating with them, coming up with new products, technologies, tools, analytics, workflows and iterating so that we have an offering that is what they're looking for, and that's something that we're going to continue doing and we're totally committed to it.

Glenn Schorr

Maybe the related follow-up is more cyclical than that structural piece, and just like -- I guess, I scratch my head at times and say, "Why is volatility so low?" Like theoretically, we've been waiting for