Goldman Sachs Earnings Call Insights: Share Count, Liquidity Levels

On Tuesday, Goldman Sachs Group Inc (NYSE:GS) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Share Count

Glenn Schorr – Nomura Securities: So you noted the 11% share count reduction since the beginning of ’11. I just want to ask maybe semantics on the quarter, share count was down almost 2% in the quarter, but it’s only down about 2% year-to-date. Is that a function of the stock going backup and just a fully diluted options count?

David A. Viniar – EVP and CFO: I think that’s partially what’s in it. The way diluted and basic share count work is a little bit different, Glenn, I think you know, basic is a point in time, diluted is an average over the period, and diluted is what we use for EPS, basic is used for book value per share. So you just have to little careful when you’re comparing those numbers, and we’re happy to get you the breakdown of all of them which you like.

Catalysts are critical to discovering winning stocks. Check out our newest CHEAT SHEET stock picks now.

Glenn Schorr – Nomura Securities: No problem. The questions is more, have you been buying back at a nice pace and it’s made a good dent in the share count over the course of the last two years. You just saw a less of it, and I know I’m going apples-on-oranges. I am asking specifically in the quarter, I would have thought the fully diluted share count might have been down more year-to-date and I just don’t know, if that’s just a function of more shares going into the fully diluted count just because of improvement in the shares?

David A. Viniar – EVP and CFO: Why don’t we do the calculation, will come back to it.

Glenn Schorr – Nomura Securities: No worries. On investing and lending, anything you could tell us on realized versus unrealized, I heard your comments about private equity on the equity line, but just curious on what’s realized versus unrealized?

David A. Viniar – EVP and CFO: I don’t have the exact numbers, it was more unrealized than realized. Many of the private was unrealized and we told is primarily although a part of that was based on performance, part of that was based on the markets and part of that was based on events happening even within private companies, but it was more unrealized and realized.

Glenn Schorr – Nomura Securities: Then on the $1.9 billion, to me this is maybe a little more art than not, but how much of that is actually been able to make its way to the to the P&L yet, because a lot of this comes through headcount related items that kind of linger as that phases through, so what is still on the come on that $1.9 billion into the P&L?

David A. Viniar – EVP and CFO: Most of that has been realized or if not will be realized by the end of the year, virtually all will be realized by the end of the year. Now, remember, part of that is non-comp, part of that has to do with people and it doesn’t include reducing compensation, it would only be a reduction of the compensation of people who are no longer here, but all of that either has been or will be realized by the end of this year.

Liquidity Levels

Roger Freeman – Barclays Capital: Just I guess, your liquidity levels are still running right up around record levels and just thinking through the still cautious approach to managing balance sheet, capital, it feels – is this level something that over time comes down meaningfully or are we going to see as the sort of permanently higher level of liquidity? I mean, I assume this is a peak level, but what kind of range relative to where you used to run which I think was like a quarter-and-a-half of this, do you think you may eventually get back to?

Harvey M. Schwartz – Global Co-Head of the Securities Division: Well, this is Harvey, Roger. So, what I would say is, if you think about the current environment, well, David in our opening remarks highlighted the fact that there have certainly been some positive events globally. It’s still a market environment where we’re remaining pretty defensive. So, I think it’d be really difficult to give you a sense of how the forward liquidity profile would look, but I think you should assume that we’ll stay conservative for the time being certainly.

Roger Freeman – Barclays Capital: Then just you said I think you’d anticipate running on a Basel III capital ratio basis Tier 1 common 100 basis points or so of sort of buffer to your requirement. Is that to – should we assume that you kind of build to that buffer and in the meantime remain at your pattern of not buying in excess of net income before you were to do anything more meaningful if you chose to do that?

David A. Viniar – EVP and CFO: I think it’s a fair assumption that we will to build to that buffer. Remember the full Basel III requirements are not in until 2019. So, there is a long time until those requirements are in. Now, it’s not to say we’re not going to get there till then. I’m sure we’ll get there well before that. But yeah, I think it’s fair to assume that we’ll build to that buffer. I think it’s also fair to assume you can’t look at any quarter even in a year; but over time it’s not likely that we’re going to buy back more than our net income. That is not a prudent way and you can’t really operate on that basis. In any quarter we might. In any year, we might; but over time we’re not going to.

Roger Freeman – Barclays Capital: Talking about the private activity portfolio, where do you think you are in terms of wanting to monetize a lot of that because it’s probably pretty seasoned at this point and obviously, the private equity firms are trying to what they can, should we see expect to see that pick up?

David A. Viniar – EVP and CFO: We will monetize as opportunities arise. I don’t think – we’re not in a mode of forcing monetization before it makes sense. But when opportunities arise and we think there’s good transactions that can be done, then we’ll monetize them.

Roger Freeman – Barclays Capital: Lastly, maybe Harvey, the equities business had a nice sequential comparison. I suspect a lot of that was equity derivatives. Can you talk a little bit to how sort of broad-based that was or if that was – it’s pretty sort of chunky structured equity derivatives, any color there?

Harvey M. Schwartz – Global Co-Head of the Securities Division: It was a more benign environment for trading in terms of risk management, so that was certainly prevalent in the numbers. But overall, it was really broad-based performance and we really benefited from the global footprint and the diversification of the businesses from prime brokers all the way through execution.

A Closer Look: Goldman Sachs Earnings Cheat Sheet>>