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Chart 55: What would get you more interested in investing in GS stock?
60%
50%
40%
30%
20%
10%
0%
Astronger revenue Normalizing regulations —_ Investing to drive Additional expense
backdrop and ability to return improving returns reductions
more capital
Source: BofA Merrill Lynch Global Research
« Management focused the presentation on Marcus, Goldman’s new consumer
lending effort. This venture has significant potential with an unsecured consumer
loan target market of $850B and Goldman coming to the market with a unique
skillset of technology and risk management, no channel conflicts or bricks and
mortar, a strong balance sheet that can provide loans at a meaningful discount to
peers, and a long history in the financial markets with a strong brand. When fully
ramped up, this unit could produce pre-tax ROA’s of 3-4%, and assuming 9-11%
equity commitments, this could translate into a high teens ROE.
¢ — Given the positive sector/GS stock reaction post the election, management was
asked on what they thought about the future of current regulation and activity
levels. While they said it is too early to tell the impact, a lower corporate tax rate
would benefit GS some, a pro-growth policy could positively impact
confidence/activity levels, and some de-regulation could ease some of the
operational challenges, though much of the regulation was well intended and has
created a stronger industry.
¢ Interms of the current environment, GS didn’t give an exact update, but said
activity has been healthy and around the election activity was similar to around
Brexit (slow before and very active post). Most other firms also mentioned positive
trends in 4Q, with normal seasonality, but up materially year over year.
Asset Managers Top 5 Takeaways
Invesco (IVZ), C-1-7, Buy
Presenting from IVZ was Loren Starr, CFO. Overall Loren was optimistic on the
outlook for IVZ to generate above average organic growth given its product mix and
performance, deliver cost savings, and accelerate buybacks, and does not expect a
significant change in the DOL impact from the election.
« | When asked what would get investors more excited about investing in IVZ stock, the
majority of respondents said that a consistent above average organic growth rate
would get them most excited (48%), followed by a more favorable market backdrop
(38%), less regulation (10%), and more operating leverage (5%), while nobody said
longer term FX hedged would get them more interested.
ea Bankof America
36 2016 Future of Financials Conference | 17 November 2016 Merrill Lynch
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