“They’ve trained their investor base pretty well to expect outperformance, but in trade you’re not going to get the stability and the transparency like from other banks,” said Davis of Farr, Miller & Washington.
‘Looks OK’
Blankfein, 59, said in November that the firm is focused on earning 10 percent, which satisfies the goals in his long-term award. That’s also the estimate many investors have used as the bank’s cost of equity, or the minimum return shareholders are willing to accept given the risk.
“People throw out that number, 10 percent, I happen to think that’s a pretty high number given that the risk-free rate of return is zero,” Blankfein said at a conference in New York in November. “But the market seems to have focused on that, so we’ve kind of focused on that number. Not for the long-term, but for this part of the cycle, I think that looks OK.”
At an investor conference hosted by Bank of America in November, Michael Carrier, a Bank of America analyst, polled the audience on what Goldman Sachs’s return on equity would be from 2014 to 2016. More than 80 percent of the people predicted it would be between 10 percent and 14 percent.
“We’re doing this by survey?” Blankfein asked, as the investors punched in their answers.
“Yeah,” Carrier answered, “unless you know.”