- Goldman Sachs announced first-quarter earnings Tuesday morning, smashing analyst expectations.
- On an analyst call after the results were published, CFO Marty Chavez was asked about Goldman Sachs' tech strategy, trading, and investment banking.
- He had a version of the same answer for almost every question, stressing Goldman Sachs' diversification and efforts to diversify further.
Diversification.
That's the word of the day at Goldman Sachs, which announced first-quarter earnings Tuesday morning, smashing analyst expectations. On an earnings call after the results, CFO Marty Chavez said "diversify" or "diversification" 16 times. Chavez set the tone in his opening remarks. He said:
"We're pleased with our improved performance in the quarter as it demonstrates the earnings power of our diversified franchise and shows what is possible with modest improvements in the environment and client activity, and we believe there is room for additional revenue and earnings growth, as we further diversify our global franchise across a broader client base with an expanded suite of products and services."
The fixed income, currencies, and commodities business is diversified, Chavez said, adding at one point that Goldman Sachs was working to "improve, broaden, strengthen, diversify our engagement with clients."
What about equities? That's diversified too. Chavez said:
"We've got a franchise diversified across products and geographies and really, in the quarter, we saw the benefits of that. The performance was strong across flow and structured products, across cash and derivatives, across geographies and all the business lines: One Delta, derivatives and prime."
Let's not forget investing and lending, where the bank's global equity portfolio "remains well diversified with over 900 different investments." Or investment management, where the bank delivered record revenue "driven by our diversified Global Asset Management business and differentiated Private Wealth Management franchise."
And the bank is not finished yet, with Chavez saying Goldman would "continue to diversify our client footprint" and would continue to emphasize "producing higher revenues from more recurring sources such as investment management and lending, generating significant operating leverage and diversifying the long-term earnings profile of the firm."
As if to stress the point, Goldman Sachs included for the first time a graphic on the bank's revenue mix in the quarterly earnings announcement.
The point, of course, is to stress that Goldman Sachs has lots of opportunities for growth and isn't dependent on any one business. If investment banking is quiet, trading may kick in. If trading is quiet, investment management, or investing and lending, may deliver. And then there are the bank's consumer-lending efforts.
That's especially necessary after a multiyear stretch when Goldman Sachs' vaunted fixed income, currencies, and commodities business misfired. It also helps justify Goldman Sachs' decision to pause buybacks for the second quarter, with Chavez saying the bank will use earnings to support future investments.
At one point, the Evercore ISI analyst Glenn Schorr asked about the full suite of products Goldman Sachs was rolling out to companies. Chavez rattled off a handful:
- "In FICC, we've increased our corporate derivative mandates."
- "In equities, as I touched on before, we've been onboarding clients, continuing to invest in execution services and infrastructure."
- "In investment banking, we've assigned coverage on over 500 of the 1,000 targeted clients and you have seen announcements of a number of senior bankers who've joined us recently."
- "And also to say a little bit on Marcus, the funded loan balance is about $2.4 billion, originations through the end of the first quarter life-to-date approximately $3 billion."
"OK. So you're not doing much," Schorr said. "I'm kidding."
