Goldman Sachs – like other banks – is willing to mix it up when it comes to selecting peer groups that flatter its relative performance.
At the bank’s second investor day on February 28, Goldman leaned most heavily on market-share data when promoting the performance and prospects of its global banking and markets division.
This was understandable, given that it is the unit where Goldman really is a market leader, in contrast to asset and wealth management or the troubled consumer group that has failed to make a dent in the share of bigger universal banks.
Even in the global banking and markets presentation there was some selectivity in deciding what constitutes a peer group, however.
A number of data points, such as reported investment banking revenues, compared Goldman with a peer group of Morgan Stanley, JPMorgan, Bank of America, Citigroup, Barclays, Credit Suisse, Deutsche Bank and UBS.
That seems unexceptional, though BNP Paribas might feel a little piqued at its exclusion, given recent gains in certain markets.
There was a subtle dig at JPMorgan that could indicate a degree of residual snobbery among Goldman’s advisory bankers, or an ongoing obsession over competition with Morgan Stanley, depending on your perspective.
Morgan Stanley was named first in each peer group listing in the footnotes to the presentation made by Goldman’s global banking and markets co-head Dan Dees.
This does not follow alphabetical order of peers or sheer weight of numbers – JPMorgan is the global leader by revenue across investment banking and markets.
Another veiled insult came in the last peer group comparison, where Goldman highlighted return-on-equity improvements for its global banking and markets unit
Another veiled insult came in the last peer group comparison, where Goldman highlighted return-on-equity improvements for its global banking and markets unit.
This time the peer group was defined as Morgan Stanley, JPMorgan and Bank of America – or at least their comparable divisions.
Not only were all European banks excluded from this peer group, but even Citigroup failed to make the cut.
Dees delivered a relaxed, confident presentation at the investor day meeting that was in contrast to those made by some of his more tightly wound peers from within Goldman – and the performance of his boss, chief executive David Solomon.
Dees even managed a joke about market share in the Q&A session after the presentations ended.
When an analyst asked where further market-share gains might come for Goldman now that European banks are finally making serious attempts to stem their loss of investment banking business, Dees quipped: “We’re equal opportunity share-takers”.
He reiterated an earlier assertion that “the strong are getting stronger” and a top three is emerging in many sectors.
There are no prizes for guessing that he views this future top three as comprising Goldman, Morgan Stanley and JPMorgan.
Dees also delivered the slightly condescending view that “there are no particular groups that are most vulnerable” to further losses of market share to Goldman.
A glance at the fourth-quarter 2022 results of the broader peer group used in Goldman’s presentation indicates that there might well be one group that is particularly vulnerable, in the form of Credit Suisse.
For the other peers, perhaps Goldman’s pitch will serve as a spur to compete more aggressively, if any extra motivation is needed.
There are certainly always multiple data points that can be used to demonstrate performance for a competitive banker.
One is the value of the shares in which senior bankers receive most of their compensation.
The day after Dees joined his colleagues in making their pitch for continuing glory, Goldman’s share price was up by 3.8% for the year.
JPMorgan stock rose by 7.5% over the same period and Morgan Stanley shares had gained 10.3%.
