Goldman Sachs Presentation at the 2008 Merrill Lynch Banking and Financial Services Investor Conference

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  • 1. Cautionary Note on Forward-Looking Statements Today’s presentation may include forward-looking statements. These statements represent the Firm’s belief regarding future events that, by their nature, are uncertain and outside of the Firm’s control. The Firm’s actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the Firm’s future results, please see the description of “Risk Factors” in our current annual report on Form 10-K for our fiscal year ended November 2007. You should also read the information on the calculation of non- GAAP financial measures that is posted on the Investor Relations portion of our website: www.gs.com. The statements in the presentation are current only as of its date, November 11, 2008.
  • 2. Goldman Sachs Presentation to 2008 Merrill Lynch Financial Services Conference Lloyd C. Blankfein Chairman & CEO November 11, 2008
  • 3. Goldman Sachs “They still have the Goldman reputation and history, but they will not be unique anymore.” Bloomberg News January, 20 1999 “…something bolder might be needed, such as a merger…” The Economist June 20, 1998 “Goldman’s earnings have grown more dependent than most people think on proprietary trading” The New York Times June 6, 1998 2
  • 4. Market Dynamics August 2007 to Present1 Asset Price Performance Volatility (VIX) Global Equity Markets Credit Markets (8)% (37)% 23 (42)% (41)% 56 (52)% (88)% S&P FTSE Hang ABX CMBX LCDX 500 Seng AA AA Aug-07 Nov-07 Feb-08 May-08 Jul-08 Oct-08 (1) Data through November 7, 2008 3
  • 5. Bank Holding Company Why now?  Regulation inevitable  Market perception − Safety of the Fed − Funding Availability How will this impact Goldman’s strategy?  No impact on existing strategy  Provides optionality in a dislocated market − Bank Deposits could lower cost of funding over time Near-term impact  New Regulator  $130bn - $150bn of assets being moved into the bank 4
  • 6. Wholesale Funding 3Q08 Unsecured Short-Term Short- Unsecured Long-Term Long- Secured Funding: $192bn Funding: $65bn Funding: $176bn GBP CAD CP Other 1% Bank Loans 2% AUD 3% 2% and W hole 2% Loans JPY 7% Secured 4% Other Debt Liquid 14% 15% Gov'ts, Current Agencies, Prom Notes LTD MBS EUR 13% 42% 30% USD Equities 42% 58% 23% Hybrid Debt 29% CP, ABS / Corporates, CMBS Munis 5% 8% 5
  • 7. Deposit Building Alternatives Historic Deposit Growth ($bn) Growth Alternatives $29.1 Organic  PWM  Ayco Third party distribution $15.4  Brokered CDs $10.7 Acquisition  Distressed opportunities  Institutional and retail 2006 2007 3Q08 6
  • 8. Core Attributes That Define GS Validated Revenue Diversification Risk Management/Fair Value Liquidity/Capital Management Franchise Culture 7
  • 9. Diversified Revenue Mix Average Since 1999 Mortgages 5% Securities Investment Services Banking 6% Commodities 19% 23% Credit 29% Asset Management FICC 12% 32% Currencies 16% Equities Commissions Interest Rate 13% Products Equities 27% Trading 13% Principal Investments 5% 8
  • 10. Risk Management 50 245% 250% 45 43 191% % of Tangible Common Equity 40 148% 35 150% 30 27 $bn 25 23 82% 22 19 19 19 20 17 15 15 50% 15 13 10 10 5 0 -50% 1 4Q07 1Q08 2Q08 3Q08 Pro-Forma Lev. Loans Res. RE CRE Total as a % of Tangible (1) 3Q08 Tangible Common Equity is pro-forma for our recent $20.75bn in capital raises pro- 9
  • 11. Liquidity and Capital Management Average Global Core Excess ($bn) Prudent Capital Management1 $102 20.7% $88 17.1% $61 $61 $51 $46 $42 15.2% $38 14.2% 11.6% 10.8% Nov-03 Nov-04 Nov-05 Nov-06 Nov-07 1Q08 2Q08 3Q08 2Q08 3Q08 Pro-Forma Tier 1 Ratio Total Capital Ratio (1) Pro-forma for our recent $20.75bn in capital raises Pro- 10
  • 12. Franchise Drives Market Share Gains Investment Banking – Strength of FIG Franchise1 Equities Commissions ($bn) ($bn) Advisory Financing $4.6 $3.7 $3.5 $15bn Acquisition $20bn IPO $3.0 $3.0 $2.6 $2.7 $2.5 $2.0 $10bn Acquisition $8bn Common and Pref. Stock Offering 2000 2002 2004 2006 3Q $8bn Acquisition $3bn Common Offering 2008 YTD (1) Americas ex-self led/advised 2008YTD transactions as of November 4, 2008 ex- 11
  • 13. Culture 12
  • 14. International Expansion Strategy Positioned to Chase GDP Growth Positioned to Chase GDP Growth Real GDP Growth by Region (YoY %) Revenue Contribution by Region1 12 GS Research Estimate 10 Asia 17% 8 6 Americas EMEA 54% 4 29% 2 0 Q107 Q307 Q108 Q308 Q109 Q309 -2 BRICS World Adv. Economies (1) Average revenue contribution from 2007 through 3Q08 13
  • 15. Opportunistic Investing Cumulative Funds Raised Over Time ($bn) $120 Total Funds Raised in $107 $100 2007 and 2008: $93 $55bn $80 $60 $52 $40 $40 $26 $26 $28 $28 $24 $20 $15 $0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 PIA REPIA 14
  • 16. Assets Under Management ($bn) $868 $863 151 154 $676 145 179 $532 255 $452 110 $373 95 215 $351 $348 268 $294 62 53 68 167 256 $258 133 58 91 104 54 96 198 107 154 98 71 96 112 134 262 57 206 58 122 118 72 108 89 90 101 48 1999 2000 2001 2002 2003 2004 2005 2006 2007 3Q08 Money Markets Fixed Income Equity Alternative Investments 15
  • 17. Returns Over the Cycle GS Annual ROTE since IPO 40% 38% 32% 29% 25% 27% Average Since IPO: 26% 20% 18% Target: 20% 16% 15% 1999 2000 2001 2002 2003 2004 2005 2006 2007 08YTD 16
  • 18. ROE is Sustainable GS ROE vs. Adjusted Leverage – 2Q99 to 3Q08 Leverage is not a major driver of our ROE 22 R2 = 0.38 20 GS Adj. Leverage (x) 18 16 14 12 10 0 5 10 15 20 25 30 35 40 ROE (%) 17
  • 19. Long Term Growth Growing Book Value Per Share in a Dislocated Environment $99.30 % R 19 $90.43 CA G $72.62 $57.02 $50.77 $43.60 $36.33 $38.69 $32.18 $20.94 1999 2000 2001 2002 2003 2004 2005 2006 2007 3Q08 18
  • 20. Goldman Sachs Presentation to 2008 Merrill Lynch Financial Services Conference Lloyd C. Blankfein Chairman & CEO November 11, 2008