Goldman Sachs 2013 Annual Report Download - page 6

4Goldman Sachs 2013 Annual Report
Letter to Shareholders
Institutional Client Services
In Institutional Client Services, our equities franchise is
built on the premise of providing a broad suite of services
to our investing clients. This means having a state-of-the-art
electronic platform, comprehensive prime brokerage services
and the capacity to be an effective liquidity provider for
our clients.
It also means leveraging our global technology platform to
have a scalable “high touch” and “low touch” approach to
meeting our clients’ needs. It is not sustainable to have only
one approach if your goal is to serve a diverse set of clients
and to produce strong returns. Clients determine how they
engage the firm, and they are increasingly looking to transact
electronically with us in both cash and derivative products.
The long-term demand, however, for product innovation and
“high touch” services remains. So, our ability to offer unique
solutions across equities products continues to be critical
to our clients. This dual approach of “high touch” and
“low touch” is a by-product of the many market structure
and regulatory changes in the equity markets over the past
15 years. Our ability to adjust to a changing regulatory
environment has been critical to maintaining a leadership
position within our Equities business.
This is also true in Fixed Income, Currency and Commodities
Client Execution (FICC). We maintain a leading position
across a broad range of products and geographies, with
a focus on being responsive to our clients’ needs. There is
considerable discussion about the outlook for FICC given
the numerous regulatory changes taking place and the
lower client volumes. We remain committed to our FICC
businesses, which, here again, reflects the value our clients
place on the services that we provide in these markets.
And, our commitment has allowed our client franchise to
grow. Over the past three years, for example, the number
of corporate and growth market relationships have each
grown by approximately 30 percent.
Some of our competitors may elect to deemphasize or exit
some FICC businesses, given their particular circumstances.
But, we believe this is likely to increase the value that clients
place on the services provided by those who remain,
especially as broader economic activity rebounds and the
trading environment improves.
expands and consumption and investment trends evolve.
In developed economies, greater CEO confidence is
driving more strategic acquisitions as more companies are
committing to longer term growth plans. Investor sentiment
has also rebounded, and more companies are taking
advantage of a better operating environment to raise equity
and debt. In the U.S., the process of ending quantitative
easing has begun, and while unsettling for certain markets,
the move to a more normalized market environment is
necessary and ultimately reassuring. All of these trends
play to the strengths and position of our businesses.
Investment Banking
Investment Banking not only includes our advisory and
financing services; it also serves as an important source of
opportunities for all parts of the firm. For example, working
with clients in our financing business often drives demand
for hedging solutions, while our advisory franchise can create
opportunities for co-investment with our business partners.
We continue to demonstrate outperformance in our advisory
franchise. In 2013, we ranked first in both announced and
completed global mergers and acquisitions.
Our equity underwriting franchise was equally strong in
2013, ranking first in global equity and equity-related
offerings, common stock offerings and initial public offerings
(IPOs). We served as bookrunner on eight of the ten largest
IPOs for the year. The technology sector was especially active
and Goldman Sachs was the lead-left bookrunner for nearly
twice as many technology IPOs in the U.S. than the next
most active underwriter.
In debt underwriting, we had our best year ever in net
revenues. While we believe that we could further strengthen
our league table position, we do not aim to be ranked first in
this business. Despite our natural desire to be ranked at the
top of any league table, we believe achieving that position,
in this case, would require a significant increase in lending
at rates that would ultimately dilute long-term returns. Our
approach could change to the extent that regulatory changes
drive more attractive pricing.
More broadly, the past year represented one of our
strongest market share performances in our advisory and
underwriting franchises since 2000.