Brad Hintz, Analyst, Sanford B

(This is not a legal transcript. Bloomberg LP cannot guarantee its accuracy.)

BRAD HINTZ, ANALYST AT SANFORD BERNSTEIN, TALKS TO TOM KEENE AND KEN PREWITT ABOUT GOLDMAN SACHS

APRIL 22, 2010

SPEAKERS: BRAD HINTZ, ANALYST, SANFORD BERNSTEIN TOM KEENE, EDITOR-AT-LARGE, BLOOMBERG NEWS KEN PREWITT, HOST, BLOOMBERG NEWS

07:07

TOM KEENE, EDITOR-AT-LARGE, BLOOMBERG NEWS: Right now, we have the drama kind of securities research, Brad Hintz with us from Sanford Bernstein. Good morning, sir.

BRAD HINTZ, ANALYST, SANFORD BERNSTEIN: Good morning.

KEENE: Buried in your note, wow, on Goldman Sachs. Did the Spitzer Research Analyst Scandal destroy the retail brokerage franchises of Merrill City and Morgan Stanley? No. Did the IPO laddering or spinning cases destroy equity capital franchises like Morgan or Credit Suisse? No. And you suggest Goldman Sachs will survive. Why will they survive?

HINTZ: Well, one, what you're seeing right now is the pullback - the pullback are the discretionary trades. So, yes, do I have to do an equity trade with Goldman? No. Do I have to do an underwriting with Goldman? Do I want to do prime brokerage with Goldman? Absolutely. Do I want to do M&A with Goldman? No question. Do I want an equity underwriting? Yes. So the key, the core businesses, you're not seeing that loss. And so you know are we going to have an impact in terms of clients being nervous? Yes, but it's not going to be long-term impact on a Goldman.

KEENE: Will they get the Ute brain drain? There are people at Goldman not making a kajillion dollars a year. Do they get picked off by the other firms?

HINTZ: There's never any shortage of talent on Wall Street and the NBA's lining up to come into Goldman Sachs. The model of Goldman holds together as long as the partnership holds together. On this one, Replica Breguet we've seen problems before on Wall Street. I don't view this as the end of Goldman.

KEENE: You mentioned equity trading needs a pop here. Is equity trading ready to take the baton? Give us a briefing on that, we don't talk about that now. First, define equity trading.

HINTZ: Equity trading is institutional equity execution and the derivative side. What did surprise us this quarter was that derivatives were so strong at Goldman. Typically, the derivatives books are long volatility and it's in volatility drop this time. It was really a surprise to us that Goldman's derivatives book held up so well. We're going to be going into a slowdown in terms of trade volume, that always happen during the summertime. But we're -

KEENE: I thought Goldman Sachs just worked until like May 1 and then everybody shows up the second week of September. No? No, wait that's Sanford Bernstein that does that. Go ahead, Ken.

Other Watch Replica

KEN PREWITT, HOST, BLOOMBERG NEWS: Brad, when you look into Goldman's trading for its own account, what did you find out about leverage?

HINTZ: Leverage stayed constant this time. That was actually one of the big surprises that leverage did not go up. VAR went down, which means their performance, their return on risk went up. This was pretty astounding, because Goldman has plenty of room to move their balance sheet up, take leverage up and take performance up. They got 20 percent without having to do that in terms of an ROE.

PREWITT: Did everybody take leverage down after September of '08?

HINTZ: Oh, yes, no question about that
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