Did Goldman Sachs regain it's edge?


In the immediate aftermath of the financial crisis, around the time Goldman Sachs sought a commercial bank charter, it seemed as if the gilded bank was mortal. But over the past few years, it has been slowly regaining a sense that it is a cut above its peers.

Unexpected Returns notes that "a long-evolving story about how Goldman has widened its advantage over most of its banking peers, through both its own constructive actions over the past few years and its competitors' fitful retreat."

It suggests that several "bigger-picture factors" distinguish Goldman and "explain why its shares have outpaced those of J.P. Morgan Chase and Morgan Stanley with a 40 percent gain the past 12 months."

The differentiating factors include:

  • Goldman has been building capital, amassing $170 billion in liquid funds, up from $100 billion a few years ago.
  • Goldman has "pruned its cost base without hollowing out its leading franchise catering to institutional investors and big companies, and without compromising its status as first-choice employer of financial talent."
  • Dodd Frank will not disproportionately hinder the bank, compared with peers.
  • Goldman's "ethic of institutionalized paranoia, high insider ownership and residual partnership culture suggest it can navigate tricky markets better than most. Good risk managers rise faster at the firm, which managed to grow book value all through the crisis."

So what do you think?

For more:
- here's the article

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