GoldmanSachs-Finalx - Ning

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Nov 18, 2013 (3 years and 8 months ago)

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Founded in 1869 by Marcus Goldman


Headquartered in New York City, New York


Joined the New York Stock Exchange in 1896


Employees 38,700 worldwide



2010
total sales were $39.161 billion with $5.014
coming from the investment management
division, which is 12.8% of the total


Ranker 1st of 148 in market capitalization


10,000 Small Businesses
-

$500 million initiative
to create the potential for small business
growth throughout the United States

Political
-



SEC regulations


In 2010 charged with civil fraud over complex
mortgage securities


FDIC regulations


Became a bank holding company in 2008, to provide
safety from what happened to other investment
banks

Economic
-



Rising commodity prices


Through the sale of derivatives they will gain a
profit


Global economic recession


In 2010 total net revenues fell by 13.3%


All
-
time high for mortgage foreclosures


Currency exchange rates


Only offer
securitised

derivatives to: Germany,
Switzerland, France, Italy, Japan, and Hong Kong

Socio
-
cultural



Business Ethics


Used cross currency swaps to hide how much debt
the Greek government had on their books to become
accepted into European Union


Consumer becoming more savings conscious


From 2008 to 2010 consumers savings increased from
$447.93 to $655.78, or 46.4%

Technological



Mobile applications


Increasing population with
smartphones

that have
downloadable applications


Factor

Trend

Evaluation

Impact (1=low,
5=high)

Rank in terms of
importance

Political

SEC regulations


FDIC regulations

Threat


T/O

4


5

1

Economic

Rising commodity
prices

Global economic
recession

Currency exchange
rates

Opportunity


Opportunity


Threat

4


3


4

2

Socio
-
cultural

Business Ethics

Consumers becoming
more savings
conscious

T/O


Opportunity

5


2

3

Technological

Mobile Applications

Opportunity

2

4

Defined:


Diversified Investments Industry


Investment Management Services Include:


Asset and Private Wealth Management


Securitised

Derivatives


Bank Deposits


Closed ended investments


Direct private investing


Mutual Funds


Securitised

products and structured fund solutions





Buyers:



Financial Institutions


Corporations


Governments


High
-
net
-
worth Individuals


Suppliers:



The Federal Reserve


United States Treasury Department



Competitors:



JP Morgan Chase & Co.


Morgan Stanley


Citigroup Global Markets Inc. (private)


Bank of America Securities LLC (private)


UBS Investment Bank (private)


Deutsche Bank AG



Substitutes:



Other bank holding companies


Consumers
-

spending rather than saving


Corporations
-

contracting rather than
expanding


Governments
-

budget cuts rather than
spending

Potential Entrants:



Very low risk of potential new entrants (since
2008 there have been approximately 320 bank
failures)


During that time some of the biggest banks
were bought out such as: Bear Stearns, Merrill
Lynch, Wachovia, and National City Corp.

Factor

Evaluation

Buyer Power

Benign ( services can be purchased on an individual or large basis
whether it be by a corporation, government, or individual and may
have a switching cost to terminate a contract)

Supplier Power

Strong Force ( rates and other factors are set forth by officials, so
there is no bargaining power)

Intensity of Rivalry

Strong Force ( there are approximately 8,000 banks in the U.S.
alone so there is a large amount of competition)

Threat of Substitute Products

Strong Force ( the largest threat is outside substitutions for
services, can have switching cost so the force wouldn’t be as
powerful)

Threat of New Entrants

Benign ( very low threat to which it is almost non
-
existent as in the
recent years there has been a large number of bank failures and
acquisitions)



Key Force
-

Intensity of Rivalry


Goldman Sachs is the 5
th

largest bank holding
company


To keep a competitive advantage Goldman
Sachs must evaluate their competencies to
eliminate any that may drive their profits down





Biggest threat is brought about by the rivals of
Goldman Sachs


If the
securitised

derivatives market is
profitable, expand into other countries and
regions of the world instead of limiting options



Continue to create a positive image with
public through their charitable fund “Goldman
Sachs Gives”



JP Morgan Chase & Co.


Morgan Stanley


Deutsche Bank AG


Citigroup Global Markets, Inc. (private)


Bank of America Securities LLC (private)


UBS Investment Bank (private)

Goldman

Sachs


JP Morgan Chase & Co.


Morgan Stanley



Deutsche Bank AG


Sales (in
billions)


$39.16

$102.694

$16.366


28.567, $40.25

Sales Growth
(quarterly)


(10.1%)

45.2%

30.1%

30.4%

Net Income


$7.71

$17.37

$2.55


2.33, $3.283

Sales
Distribution

by
Division


Investment banking
-

12.28%
Investment management
-
11.93%


Commissions
&Fees
-

9.12%

Market making
-

34.93%

Other principal transactions
-
17.7%

Interest income
-

14.04%

Investment banking
-

6.02%

Principal

transactions
-

10.61%

Lending&Deposit

Fees
-

6.17%

Asset management
-

13.14%

Securities gains
-

2.89%

Mortgage fees
-

3.77%

Credit card
-

5.74%

Other
-

1.99%

Interest Income
-

49.66%

Investment banking
-

26.24%

Other principal
transactions
-

54.77%

Commissions&Fees
-

13.89%

Asset management
-

.64%

Other
-

6.09%

Interest expense
-

(1.63%)

Interest income
-

50.08%

Commissions&Fees
-

37.45%

Other income
-

2.67%

Financial
assets/liabilities at fair
value
-

11.74%

Financial assets
available for

sale
-

.7%

Equity method
investments
-

7.01%

Employees


38,700

239,831

62,542

102,062

Competitor

Objectives

Goldman

Sachs

Research from across

economics, commodities and
strategy research

to locate investment opportunities
across asset classes. We focus on key themes,
recommendations and how to implement them.



JP Morgan Chase

& Co.

Be a catalyst

for meaningful, positive and sustainable
change within our highest
-
need neighborhoods and
communities across the globe.

Morgan Stanley

Our global citizenship is a direct reflection of the firm's
core values and enhances our ability to provide superior
service to our clients, our employees and our
communities.


Deutsche Bank AG

We compete to be the leading global provider of
financial solutions, creating lasting value for our clients,
our shareholders, our people and the communities in
which we operate.


Company

Product Diversity

Reach of
Sales

Number of
Divisions

Goldman Sachs

Investment Banking

Trading

& Principal Investments

Asset Management

Securities Services

Global

4

JP

Morgan Chase &
Co.

Investment Banking

Commercial

Banking

Treasury & Securities Services

Asset Management

Retail Financial Services

Global

5

Morgan Stanley

Institutional Securities

Global

Wealth Management Group

Asset Management


Global

3

Deutsche Bank AG

Corporate & Investment Banking

Private Equity


Asset Management

Corporate Investments Division

Global

4



Reputation


Who is going to provide the best customer service to
the client to earn their future business as well


Investment Strategies


Is your client willing to take on more or less risk


Competitive rates on savings vehicles


Competitive rates/fees on lending instruments



The goal of Goldman Sachs along with their
key competitors is to provide the quality of
customer care to each of their clients, along
with competitive and affordable rates



Need good customer service


Lowest fees and interest for lending instruments


Higher rates of return for their savings vehicles

Company

Number of Countries

Products
Marketed In

Goldman Sachs

30+

JP Morgan Chase & Co.

25+

Morgan Stanley

25+

Deutsche Bank

AG

60+

Company

Core Competencies


Goldman Sachs

Providing excellent

diversification for
wealth and asset management
worldwide

JP Morgan

Chase & Co.

Considered one

of the “Big Four” banks
in the U.S. and is highly competitive in
market capitalization

Morgan Stanley

Providing global financial

services to
a
diversified group of corporations,
governments, and financial institutions

Deutsche Bank AG

A large presence in Europe, the
Americas, Asia Pacific

and
emerging
markets

Company

Market Cap

(billions)

Market Capitalization

Rank
(industry)

Goldman Sachs

$87.02

1
st

of 147

(Diversified Investments)

JP Morgan Chase & Co.

$181.58

26
th

of 217

(Money Center Banks)

Morgan Stanley

$41.17

10
th

of 175

(Investment Brokerage)

Deutsche Bank AG

$54.48

7
th

of 10

(Foreign Money Center
Banks)



Rise in unemployment


This has caused a greater increase in demand for
savings vehicles


From 2008 to 2010 consumers savings increased from
$447.93 to $655.78, or 46.4%


More strict regulations due to the collapse of
the housing markets


Research shows that over the next 10 years that
global GDP will grow 4% annually


400 million people projected to move into
Chinese urban centers by 2050, which will
result in an increasing demand for
commodities


Pools of capital in sovereign wealth funds in
both developed and emerging economies are
expected to grow from $3 trillion to $10 trillion
over the next decade



Comparing the quarterly sales growths by each of
the following organizations it is easy to see the
potential.


Compared with their key competitors Goldman
Sachs growth is limited on the basis of services
provided, but there are many growth markets they
are pursuing.


One of the biggest reasons as to why Goldman Sachs had
a quarterly loss was due to the fact in 2009 their revenues
had jumped by 50% from the previous year.

Company

Target Consumer

Goldman Sachs

High
-
Net
-
Worth Individuals

Corporations

Governments

Financial Institutions

JP Morgan Chase & Co.

Financial Institutions

Governments


Institutional Investors

Multinational Corporations

Retail Investors

High
-
Net
-
Worth Individuals

Morgan Stanley

Corporations

Governments


Financial Institutions

Individuals worldwide

Deutsche Bank AG

Corporations

Financial

Institutions

High
-
Net
-
Worth Individuals



One of the most efficient ways to advertise
today being able to reach everyone with the use
of internet


Facebook


LinkedIn


Twitter


YouTube


Flickr


Podcast


To successfully compete in the diversified
investments market it is important to highlight the
service differentiations, so that you are always
separating yourself from your competition.



The keys to competition in this industry is
reputation, investment strategies, and competitive
rates on savings vehicles and lending instruments


Social Media is a great and cheap way to advertise,
along with the potential to scout new talent for the
workforce,
ie
. LinkedIn




Customer Service and Loyalty comes first


Their assets
are their
people, capital &
reputation


Provide superior returns to shareholders


Great sense of pride in the professional quality
of work provided


Creativity and imagination is in everything
they do


2006

2007

2008

2009

2010

Sales

(in

millions)

$37,665

$45,987

$49,802

$45,173

$39,161

Profits

$9,398

$11,407

$2,041

$12,192

$7,713

Percentage
Increase/
(decrease) in
profits

21.4%

(118%)

697%

(163%)



From 2006 to 2010 there is a sales increase of approximately 4%




However from 2008 the sales actually decrease by 21.4%



Their profits have a few good years but ultimately see a decline by 17.9%




Goldman Sachs is currently rated as having

Aggressive

Accounting & Governance Risk (AGR) they are in the 16th
percentile among all companies, indicating higher
Accounting & Governance Risk (AGR) than 84% of
companies.


On January 11, 2011, Goldman Sachs
announced it will be making certain changes to
their business segments, the company has
reported the following four business segments:
Investment Banking, Institutional Client
Services, Investing and Lending, and
Investment Management.


Also hoping to capitalize from more global
capital markets


Cash and cash equivalents $39.788b
(4%)


Cash & securities segregated for regulatory and other purposes $53.731b
(47%)


Collateralized agreements $188.355b
(31%)


Securities borrowed $166.306b
(12%)


Receivables from brokers, dealers and clearing organizations $10.437b
(17%)


Receivables from customers and counterparties $67.703b
(22%)


Financial instruments owned $356.953b
(4%)


Other assets $28.059b
(5%)



The percentage increase/decrease is compared with 2009 value





Strengths



Well diversified business mix


Best positioned versus its peers for long
-
term
earnings growth due to superior business mix and
culture


Dominant position in the most profitable segments
of investment banking and trading businesses, with
a history of outperforming during both strong and
weak market environments.


Weaknesses



Weakness in equity markets is likely to affect
investor confidence


As a bank holding company, Goldman faces
structural challenges including a potential shift of
more of its liability mix to deposits and away from
more wholesale
-
oriented funding


Also Goldman has a very high accounting and
governance risk which could also affect confidence
within the company


Opportunities



Expectation of more private equity gains, despite the
flattish equity markets.


High leverage to the global capital markets, with a
leading presence in investment banking, trading,
and prime brokerage.


Threats



A slowing US economy could result in a softer equity
underwriting business and low merchant banking gains.


Many of Goldman’s businesses have net long positions in
various financial instruments. These investing and
trading positions are marked to market on a daily basis,
and declines in these asset values can directly affect
Goldman’s financial performance


Goldman could also face challenges from Basel III and the
Dodd
-
Frank Act.


Investing in Growth Markets


The growth strategy for Asia has been Korea, where
Goldman has built a significant presence since 2007
through acquisitions, alliances, and product
expansion


The BRICs are a major target because these growth
markets are the anchors in the global economy.


Brazil


Russia


India


China




Goldman should be in
the middle of this chart.


Market Penetration for their
exploration into potential
growth markets


Product Development to
constantly try to create new
solutions for their existing
clients


Market development in
emerging markets by
creating strategic alliances


Diversification to better
help international clients as
they enter foreign markets


Strengthening Client Relationships


Strengthening Reputational Excellence


Strengthening Committee Governance


Enhancing Transparency of Communication &
Disclosure


Strengthening Training & Professional
Development


PZU SA


Largest insurance company in Central and Eastern Europe,
2010 Goldman helped complete a successful IPO that launched
PZU on the path to becoming an independent company


This was the largest IPO in Europe since 2007 and the largest
ever in Central Europe, which led to Goldman Sachs
International established an office in Warsaw, Poland in 2010


Ports America Group (PAG)


Goldman assisted PAG in raising $249 million for
Baltimore’s
Seagirt

Marine Terminal, with the
widening of the Panama Canal to be completed in
2014





AIA Group Limited (AIA)


$20.5 billion, AIA was the largest IPO ever listed on
a single stock exchange, the third largest IPO
globally and the world’s largest IPO in the insurance
sector


HRT
Participacoes

em

Petroleo

S.A. (HRT)


With ambitious plans to explore and develop oil
fields in the
Solimoes

Basin of Brazil, as well as
offshore exploration areas in the Walvis and Orange
basins of Namibia. Goldman helped HRT raise more
than $1.5 billion through an IPO in October 2010



Dai
-
ichi

Life Insurance Company, Limited
(Dai
-
ichi

Life)


In April 2010 Goldman helped Dai
-
ichi

Life bring an
IPO to the Tokyo Stock Exchange which resulted in a
$11.2 billion offering


This was the largest IPO in Japan since 1998, and
Dai
-
ichi

has already had the opportunity to expand
internationally.



Major focus towards service and loyalty to their
clients



Aggressive approach towards investments to
provide superior returns to shareholders



The expansion of creativity and imagination to
provide the best possible solutions to any problem
that arises


Taking great pride in the professional quality of
work


Expanding into potential growth markets, which
Asia is one of the biggest targets by Goldman
Sachs