Finance

Gillian Tan is a Bloomberg Gadfly columnist covering deals and private equity. She previously was a reporter for the Wall Street Journal. She is a qualified chartered accountant.

Goldman Sachs Group Inc. is using offense as its defense, and it's about time. 

Rather than using its slot at the annual Barclays financial-services conference to freewheel, as has been the norm, the bank delivered a formal presentation on Tuesday morning, seemingly designed to arrest declining investor confidence in the wake of the worst ever quarter for its fixed income, currencies and commodities (FICC) business.

Underwhelming
After rising with the tide in the wake of last year's election, Goldman shares have slipped this year and are currently trading about 4% below the average analyst target price.
Source: Bloomberg

Shareholders should be buoyed by the message from Goldman's president and co-chief operating officer Harvey Schwartz and the bank's efforts to shed light on, in his words, "what's happening under the hood." And it's heartening that Goldman has a plan and strategies that could generate $5 billion in incremental revenue over the next three years, 16 percent more than its 2016 total -- even if the current operating environment doesn't improve. Can it deliver? We'll see.

Show Me the Money
Goldman estimates it can generate $5 billion in additional revenue in three years. This bump won't come easily, in part due to incumbent rivals.
Source: Company presentation

Goldman intends to lift its FICC business out of the doldrums in part by attempting to win more business from 600 clients that don't currently rank the bank among their top three providers of these services. I'm sure Goldman can improve its standing among some of those clients, but it's not like the existing bankers occupying those go-to spots are simply going to hold the door open and let one of their biggest rivals take what they want, just because they've decided they're ready to close the gap.

We Can Do Better
Goldman reckons it can snare more than $600 million in annual revenue by bettering its FICC market share, especially among asset managers and banks
Source: Company presentation; Coalition rankings in 2016
*Client numbers are approximate

The same dynamic holds true for its efforts to supercharge growth elsewhere, namely investment banking, investment management, lending and financing. (One exception where competition doesn't seem to be as rife is consumer lending, where Goldman appears to be gaining decent traction.)

For clients, the firm's stink of desperation gives them an upper hand. Even if Goldman poaches their longtime favorite banker as a way to enter the inner circle, they can -- and should -- demand the lowest fees or best terms in exchange for winning their business. 

Considering the New York firm's track record and the fact that it's early days yet, it may be worth giving Goldman the benefit of the doubt lays on its assurances -- and the stock's early gains Tuesday suggest investors are doing just that. Schwartz ended his presentation reiterating the bank's focus on improving returns and its overall franchise: "When I say focused, I mean completely obsessed." Those are some welcome, fighting words. It's now about the follow-through.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Gillian Tan in New York at gtan129@bloomberg.net

To contact the editor responsible for this story:
Beth Williams at bewilliams@bloomberg.net