Goldman Sachs Group Inc. Chairman and Chief Executive Officer Lloyd C. Blankfein said he’s more optimistic about markets than some economists and investors.
“I tend to be a little more positive than what I’m hearing from other people,” Blankfein, 57, told Bloomberg Television today in an interview at the investment bank’s New York headquarters. “One of the big risks that people have to contemplate is that things go right.”
Blankfein, chairman and CEO since June 2006, warned about the potential for a credit crisis during a June 2007 conference, 15 months before the collapse of Lehman Brothers Holdings Inc. In November, he said he expected markets to “snap back.” The Standard & Poor’s 500 Index rose 12 percent in the first three months of this year, the most since the third quarter of 2009.
While profit at Goldman Sachs improved from the end of 2011, the fifth-biggest bank by assets reported last week that first-quarter net income fell 23 percent from a year earlier as revenue from trading bonds, currencies and commodities lagged behind rivals JPMorgan Chase & Co. and Citigroup Inc.
Blankfein said his bank’s 12.2 percent return on equity in the first quarter was a reflection of muted economic growth and client demand, which he called a “lower third-quartile opportunity set.” He said that investors shouldn’t extrapolate the firm’s long-term prospects from those results.
Goldman Sachs’s business model “suits us just fine” and “we have a tremendous amount of room ahead of us to expand in the businesses we’re in,” Blankfein said. The firm has been conservative in expanding in overseas markets where it sees some of the best opportunities going forward, he said.
“There’s a chance to be what Goldman Sachs is in the U.S. over a much broader swath of the world, and that’s good,” he said. Still, he added “there’s a consequence sometimes to being too early.”
Blankfein has sought to emphasize the firm’s focus on clients after the U.S. Securities and Exchange Commission and a Senate subcommittee accused the company of misleading investors about mortgage-related investments in the run-up to the financial crisis. Arthur Levitt, a former SEC chairman who is now an adviser to Goldman Sachs, said last month that the firm should stop saying it puts customers first “because nobody really puts customers first.”
Blankfein said he’d spoken to Levitt since he made those comments and that he thinks Levitt was referring to Goldman Sachs’s market-making business, where the firm is typically buying what clients are selling or selling what clients are buying.
“Arthur’s comments were reserved for a narrower part of the business,” Blankfein said. Even in market-making, the firm shows that clients come first because in rough markets “we will hold ourselves out as standing out there and doing more than other people would be doing,” he added.
In a separate interview today with CNBC, Blankfein said that an internal inquiry has found no “substantiation” of a former employee’s claims that staff disparage clients. Greg Smith, a former derivatives salesman who quit after 12 years at the firm on March 14, wrote a New York Times op-ed that blamed Blankfein and President Gary D. Cohn, 51, for presiding over a decline in the firm’s culture of putting clients first.
“The reaction internally was one of shock,” Blankfein told CNBC. “We had 30,000 people who felt the opposite and clients who were supportive.”
Hit by Bus
Blankfein told CNBC that Goldman Sachs’s board of directors has a leadership succession plan for the long term and for the hypothetical situation in which the CEO is hit by a bus. If that were to happen, the person who would succeed Blankfein doesn’t know it.
“We have a lot of terrific senior executives including, but not limited to, Gary,” Blankfein said, referring to Cohn. “I have no plans to leave.”
Goldman Sachs as an institution doesn’t have a view on who should be elected U.S. president in November, Blankfein said. He said he hasn’t made up his mind about whom to support.
“I’m a Rockefeller Republican -- a registered Democrat and a Rockefeller Republican,” he said, adding that he holds conservative views on fiscal policy and more liberal positions on social issues. “Where that will get me, I’m not sure yet.”
Goldman Sachs closed yesterday at $114.11 in New York, lower than the firm’s $123.94 per share tangible book value as of March 31. The shares fell 0.4 percent at 1:20 p.m. today.