“Sorry to give you a challenging time on your initial contact,” UBS analyst Brennen Hawken instructed Goldman Sachs’ incoming chief financial officer Marty Chavez, in advance of returning to request a problem about a common subject matter.
“The FICC [Set profits, currencies and commodities] problem, I am nevertheless perplexed, I imagine I have some business,” he stated.
Set profits in unique upset, with earnings up just 1% on the initial quarter of 2016 and down from the remaining a few months of 2016. In comparison, Goldman Sachs’ rivals posted double-digit gains in set-profits earnings.
It was this weak effectiveness in FICC that dominated the dialogue on the earnings contact with analysts. It also popped up consistently in analyst notes responding to the results. Hawken for instance released a note subtitled: “Really hard to set lipstick on these results, provided reliable expectations and peer results so significantly.”
Chavez, who is at the moment deputy CFO and will phase up to the CFO function next thirty day period, consistently cited small stages of volatility as cause for the bad effectiveness.
Volatility in the currency and commodities markets have been at two-yr lows, he stated, while realized volatility in the equity market was also at a historic small. When volatility is small, shopper exercise is mild, he stated.
“We underperformed this quarter, and the underperformance was driven by commodities and currencies,” Chavez stated. He additional that the weak spot was exclusive to Goldman Sachs, provided its robust posture in commodities.
Pressed by analysts about Goldman Sachs’ shopper mix, Chavez stated that some rivals have a more substantial company shopper base, as they have much larger lending books and more substantial financing units. Still, Chavez consistently famous that this disappointing effectiveness represented just “one particular quarter.”
He stated that in some durations Goldman Sachs’ outperforms, this sort of as was the case in the second 50 percent of 2016, and on other events it underperforms.
“This isn’t a instant of super worry for us,” Harvey Schwartz, the outgoing CFO, additional on the contact.
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