Stock analysts have long
been mocked for their fawning attitude towards bank CEOs and
CFOs on earnings calls. The phrase great quarter,
guys as an opening gambit became such a cliché
that most analysts eventually toned down their approach, and
led by self-appointed scourge of Wall Street Mike Mayo
have even started showing open scepticism about the
corporate bromides delivered by bank executives.
The bank chiefs
themselves typically maintain their natural tone.
JPMorgan CEO Jamie Dimon displays an air of incredulity that
anyone should question the performance of his bank, even
when he is discussing a bizarre multi-billion dollar trading
loss or a record legal settlement for previous misconduct.
Morgan Stanley CEO James Gorman delivers a convincing
performance as a management consultant whose greatest pleasure
in life is shutting down business lines, ideally when he gets
to fire a few traders.
Goldman Sachs CEO Lloyd
Blankfein, who only puts in an appearance on earnings calls
from time to time, deploys his trademark wisecracks to deflect
questions about the long-term viability of the banks
Blankfeins proxy on most earnings calls CFO Harvey
Schwartz introduced a new twist on the traditional
master/servant relationship between bank heads and analysts in
discussing Goldmans most recent quarterly results,
Goldman has just finished
what is a disappointing year by its normal standards. It lost
market share in both fixed-income and equities trading and is
subject to growing questions about whether it has the right
business mix for the future.
In discussing a year that
was weak, without being disastrous, Goldman appears to have
decided to attempt a form of communications jujitsu on its
earnings call by portraying worrying trends as positive, and
Schwartz adopted a personal tone that was about as warm and
fuzzy as a Goldmanite can get.
Schwartz talked of
"finding balance" as a goal for Goldman, while also downplaying
the importance of market share for the firm. "We always
prioritize risk management over market share," he said, in an
apparent attempt to imply that competitors were taking business
from Goldman because of a reckless approach to risk.
This line was undermined
by an increase in reported value at risk for the quarter at
Goldman that was higher than the change at many of its peers,
but Schwartz stuck to his guns and even delivered a koan worthy
of a Buddhist philosopher. "All revenues are not created
equally," the sage of 200 West Street mused. "There is risk in
these revenues [that] you have to look at past the
Staying in character as a
Schwartz took care to greet each analyst in turn by first name
as they delivered their questions. And he commended the
analysts on the perspicacity of their questions so
metronomically that the approach had clearly been agreed in
Schwartz said repeatedly, as analysts delivered valid but
predictable queries about when Goldman would resume announcing
a return-on-equity target, the challenges faced in fixed income
and the prospects for investment banking deal-making in 2014.
As the call wore on Schwartz introduced an element of variety.
"Its a good question," he said to an enquiry about the
difference between Goldmans investment and lending
revenues and its client business. "Its an important
question," was his evaluation of a query about whether Goldman
should deploy its balance sheet more aggressively in prime
broking. And an enquiry about whether litigation reserves can
be expected to fall at the bank received the ultimate plaudit.
"This is a very important question," Schwartz said, without
actually delivering an answer.
Towards the end of the
call Schwartz delivered a take on the backdrop for investment
bank earnings at Goldman in 2014 that was a masterly example of
his new philosopher-CFO approach. "You could certainly take an
optimistic view," he said. "But I am not doing that."
Goldman might face further headwinds in terms of maintaining
market share and boosting its return on equity, but it can at
least take comfort from the increasingly accomplished public
performances of its CFO of just over a year.