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Investors await Goldman's $5 billion answers as trading picks up

Reuters  |  NEW YORK 

By Catherine Ngai

NEW YORK (Reuters) - Last year, Sachs Group Inc GS. N executives met with some scepticism after unveiling an ambitious plan to grow revenue by $5 billion, whether or not markets remained subdued. Now that trading has picked up, is hoping the can do even better.

On Tuesday, Goldman's chief executive officer, Lloyd Blankfein, is scheduled to speak at an industry conference in Beach, where he intends to provide more information about the revenue-boosting effort.

It will be the first time Blankfein himself tries to persuade investors with a formal, public presentation about the lofty goals has set. Since his deputies first laid out the revenue-growth strategy in September, analysts have peppered executives with questions about the underlying assumptions and cited concerns raised by investors.

For instance, told Goldman's chief in October that many of his clients wanted to know why thinks it can boost revenue by $1 billion, given the challenges money managers are facing more broadly. In a recent report, said shareholders remain "sceptical" about other components of Goldman's revenue growth plan, like consumer lending, despite assurances from senior executives.

"Mr. Blankfein will be providing an update on our business to investors (Tuesday), and we are in the early stages of delivering on the growth plan we outlined last fall," a said in an email.

is hesitant to forecast that will be able to generate any of the promised $5 billion, said in an interview.

"This is the environment that has been waiting for all decade," said Mayo, who expects the to achieve $3 billion of its $5 billion target helped by volatility returning to stock and bond markets globally.

"If doesn't get it right in 2018, then management has some serious questions to ask."

Trading had been a profit engine for Sachs for the decade leading into the 2007-2009 financial crisis, but lethargic markets, new regulations and tougher competition have since upended the business.

In 2009, boasted 19 percent market share in bond trading, which generated $121 billion in revenue across Wall Street, according to the bank's September presentation.

But since lost nearly half that share as the revenue pool has declined by nearly half. Last year the reported its worst bond trading results since 2008, with revenue dropping 30 percent. (Full Story)

As a result, is trying to grow businesses like investment management, while trying to generate more trading revenue from existing customers as well as new ones. It is also diving into Main Street banking, an area where it never previously had significant operations.

launched its digital consumer Marcus in 2016, primarily targeting credit-card borrowers who want to refinance into cheaper loans. By the end of last year, Marcus had originated $2.3 billion in loans, and management expects to grow that figure by $13 billion through 2020. The growth rate has caused concern among some investors and analysts, given recent signs across the industry that consumer credit risk is on the rise, particularly in cards.

Analysts are hoping Blankfein will talk about bond trading on Tuesday and also provide more details on the revenue growth initiative. Some said the presentation itself is a step in the right direction for a that historically disclosed little about its strategy and declined to issue financial targets the way rivals like MS. N routinely do.

"Over the last many years, has been very shy about what it's going to do, so you never had a full score card to measure against," said "This is a very different Sachs today than it was 20-30 years ago."

(Reporting by Catherine Ngai; editing by and Lisa Shumaker)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, February 13 2018. 18:22 IST