Cautionary Note Cautionary Note on Forward on Forward- -Looking Statements Looking Statements Today’s presentation may include forward Today’s presentation may include forward- -looking statements. looking statements. These statements represent the Firm’s belief regarding future These statements represent the Firm’s belief regarding future events that, by their nature, are uncertain and outside of the Firm’s events that, by their nature, are uncertain and outside of the Firm’s control. The Firm’s actual results and financial condition may control. The Firm’s actual results and financial condition may differ, possibly materially, from what is indicated in those forward- differ, possibly materially, from what is indicated in those forward differ, possibly materially, from what is indicated in those forward differ, possibly materially, from what is indicated in those forward looking statements. For a discussion of some of the risks and looking statements. For a discussion of some of the risks and factors that could affect the Firm’s future results and financial factors that could affect the Firm’s future results and financial condition, please see the description of “Risk Factors” in our condition, please see the description of “Risk Factors” in our current annual report on Form 10-K for our fiscal year ended current annual report on Form 10 t t l l t t F F 10 10 K f K for our fiscal year ended K f fi fi l l d d d d December 2011. December 2011. You should also read the information on the calculation of non You should also read the information on the calculation of non- - GAAP financial measures and the impact of Basel III that is posted GAAP financial measures and the impact of Basel III that is posted on the Investor Relations portion of our website: www.gs.com. on the Investor Relations portion of our website: www.gs.com. The statements in the presentation are current only as of its date, The statements in the presentation are current only as of its date, p p y y , , November 13, 2012. November 13, 2012.
Goldman Sachs Presentation to Goldman Sachs Presentation to Bank of America Merrill Lynch Bank of America Merrill Lynch Banking and Financial Services Banking and Financial Services Conference Conference Lloyd C. Blankfein Lloyd C. Blankfein Chairman & CEO Chairman & CEO November 13, 2012 November 13, 2012
Current State of the Market Current State of the Market Cyclical versus Secular Changes Cyclical versus Secular Changes Cyclical Factors Cyclical Factors Secular Factors Secular Factors Client activity Cli Client activity Cli t t ti it ti it Technology Technology T T h h l l Risk aversion Risk aversion Regulation Regulation Structured transactions Structured transactions Structured transactions Structured transactions Globalization / BRICs Globalization / BRICs Globalization / BRICs Globalization / BRICs Low leverage Low leverage Capital requirements Capital requirements Low yields Low yields Low yields Low yields Demographics Demographics Demographics Demographics Competition Competition 3
Global Concerns Global Concerns Investor Areas of Focus Investor Areas of Focus Eurozone Crisis Eurozone Crisis The Italian government cut Italy’s 2012 The Italian government cut Italy’s 2012 growth forecast for its economy to a growth forecast for its economy to a 1.2% contraction (Apr 2012) 1.2% contraction (Apr 2012) Spain's borrowing costs rise to the Spain's borrowing costs rise to the highest rate since the launch of the highest rate since the launch of the euro in 1999 euro in 1999 (Jun 2012) (Jun 2012) US Fiscal Cliff US Fiscal Cliff “I have expressed concerns “I have expressed concerns Growth in China Growth in China about what would happen about what would happen about what would happen about what would happen Middle Eastern Unrest Middle Eastern Unrest Middle Eastern Unrest Middle Eastern Unrest on January 1st (2013), which on January 1st (2013), which The World Bank lowered its The World Bank lowered its “In the Middle East and North “In the Middle East and North would be a major fiscal would be a major fiscal growth estimate for the growth estimate for the Africa activity in the oil Africa activity in the oil contraction. I think it would contraction. I think it would Chinese economy for the Chinese economy for the importers will likely be held importers will likely be held pose a risk to the recovery” pose a risk to the recovery” year to 7.7% from 8.2% (Oct year to 7.7% from 8.2% (Oct back by continued uncertainty back by continued uncertainty ~ Fed Chairman Ben ~ Fed Chairman Ben 2012) 2012) associated with political and associated with political and associated with political and associated with political and Bernanke during a House Bernanke during a House economic transition in the economic transition in the Financial Services Financial Services aftermath of the Arab Spring aftermath of the Arab Spring Committee hearing (Feb Committee hearing (Feb and weak terms of trade— and weak terms of trade —real real 2012) 2012) GDP growth is likely to slow to GDP growth is likely to slow to about 1¼ percent in 2012” ~ about 1¼ percent in 2012” ~ IMF’s World Economic Outlook IMF’s World Economic Outlook (Oct 2012) (Oct 2012) 4
M&A Activity at Depressed Levels M&A Activity at Depressed Levels Global Announced M&A Global Announced M&A as a % of Market Cap 1 as a % of Market Cap as a % of Market Cap as a % of Market Cap 1 Considerations Considerations Considerations Considerations High return business High return business 6.8% Once macro concerns subside, Once macro concerns subside, 28% Below valuations, cash balances and valuations, cash balances and Trend low funding costs provide an low funding costs provide an attractive environment attractive environment Drives other business Drives other business 5.3% opportunities opportunities Prior 10 Year 2012YTD Average 1 M&A data sourced from M&A data sourced from Dealogic Dealogic. Market Cap data sourced from . Market Cap data sourced from FactSet FactSet. 2012YTD data is presented on an annualized basis as of 10/30/2012 . 2012YTD data is presented on an annualized basis as of 10/30/2012 5
Investor Activity Remains Muted Investor Activity Remains Muted Selected Fixed Income and Equities Volumes Selected Fixed Income and Equities Volumes Decline in Average Quarterly Volumes by Product: 2010 versus 2012YTD Decline in Average Quarterly Volumes by Product: 2010 versus 2012YTD 1 Fixed Income Federal Agency Corporate Equities -15% -24% -39% 1 FICC data sourced from the Federal Reserve Bank of New York. Equities represents average daily share volumes for NYSE, NASD FICC data sourced from the Federal Reserve Bank of New York. Equities represents average daily share volumes for NYSE, NASDA AQ, BATS and Direct Edge. Q, BATS and Direct Edge. Data as of 9/30/2012 Data as of 9/30/2012 6
Business Confidence Remains Low Business Confidence Remains Low Business Confidence 1980 Business Confidence 1980 – – 2012YTD 2012YTD 1 20% 20% 20% 20% 12% 12% 19% 19% 11% 11% 18% 18% GDP GDP S& S& &P 500 Cash as &P 500 Cash as 10% 10% 10% 10% ment as % of G ment as % of G Confidence ► 17% 17% ◄ Lower Co Confidence Lower Co 9% 9% 16% 16% 8% 8% Fixed Investm Fixed Investm s % of Assets s % of Assets 15% 15% 15% 15% Higher C Higher C nfidence nfidence 7% 7% 14% 14% 6% 6% 13% 13% 5% 5% 12% 12% 11% 11% 4% 4% 1980 1980 1984 1984 1988 1988 1992 1992 1996 1996 2000 2000 2004 2004 2008 2008 2012 2012 US Business Fixed Investment as a % of GDP US Business Fixed Investment as a % of GDP S&P 500 Companies' Cash as a % of Assets S&P 500 Companies' Cash as a % of Assets 1 Fixed Investment as % of GDP sourced from Bureau of Economic Analysis; S&P 500 Cash as % of Assets excludes financials and is Fixed Investment as % of GDP sourced from Bureau of Economic Analysis; S&P 500 Cash as % of Assets excludes financials and is sourced from sourced from Compustat Compustat 7
Managing Expenses Managing Expenses Driving Efficiency Driving Efficiency Driving Efficiency Driving Efficiency GS Workforce Employed GS Workforce Employed at High Value Locations (HVLs) at High Value Locations (HVLs) Firmwide Firmwide Total Staff Total Staff 22% 35,500 -8% 8% 32,600 32,600 10% 2007 3Q12 2Q11 3Q12 In 2Q11 announced $1.2bn expense initiative, which has since been increased to $1.9bn In 2Q11 announced $1.2bn expense initiative, which has since been increased to $1.9bn 8
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