On to Liabilities of GS Bank

GS bank has an interesting liabilities mix to boot, I mean it is in the 2nd percentile for total liabilities. I think this assuages any concern with regards to how risky it is. The bank has very little deposits, again, it's not the typical bank.

 Its deposits are also in the 2nd percentile. It has virtually nothing of its deposits in demand deposits (it has the 9th percentile).

Other deposits, which I assume are all interest bearing, have more middle of the pack percentile rankings.

Other borrowings that GS Bank has include the ultra conservative fed funds (94th percentile), fed home loan borrowings (21st percentile), total other borrowings (97 percentile), acceptances and other liabilities (98th percentile). "Other liabilities' include mortgages and leases.

 Total liabilities though is rather benign. Like I said, it's in the 2nd percentile.

One fact which pops out at me is the trend for standby letters of credit.

GS bank's SLOC have risen from the 10th percentile to 83rd. SLOCs are typically safe so no alarm here.

Non earning assets and total assets growth

Some more interesting tidbits. GS Bank is indeed savvy by not having a lot invested in fixed assets.

I define fixed assets as premises, other real estate owned (OREO), real estate ventures, and investments in unconsolidated subsidiaries. The percentiles for each of those is respectively: 9th, 7th, 78th, and 72nd. What has just donned on me is that perhaps GS Bank is keeping their OREO artifically low by moving those assets into real estate ventures or investments in unconsolidated subsidiaries. I would have to dig into the accounting standards FASB methinks.

Here's a stat that not's totally in the peripheries compared to other banks:

Where did the difference in fixed assets and total non earning assets come from? Bankers' acceptances, which are in the 89th percentile.

And here's the figures for total assets (in $ amounts as well as in growth rate).

GS Bank Loan Portfolio

New data is beginning to trickle in for June 30 2011. Why can't the economy just stay frozen in time? Lol.

Here's some interesting tidbits about GS Bank. It doesn't seem like much of a bank AT ALL. I would had thought that they would more akin to an actual depository institution. See for yourself.

Yep, GS Bank has less than 5% of total assets in its loan portfolio. They seem to be more like a hedge fund to me, taking depositors' money to trade with. But, hey, let's not kid ourselves, they have always been and probably always will be primarily a broker-dealer. Seems to me that they shouldn't be FDIC insured.

At least they do hold all the loans they do make instead of selling them off. Since GS Bank is essentially the "carryover" from GS' industrial loan bank, I thought that GS Bank would be more like a regular deposits and loans institution, assuming that the industrial bank which got converted into GS Bank was more like a deposits and loans institution. I will see what that industrial loan bank was like later in this post.

What I find strangest is that GS Bank has had no allowances for loan losses at all (in percentage of total assets-wise).

As for GS' industrial loan bank which had the last UBPR data upload as of 9/30/2008, it held double GS Bank's loan portfolio (again speaking from percentage of total assets perspective).

Now the question that arises in my mind is: Should I look into FDIC policies as why GS Bank would be given such leeway; or, should I shrug my shoulders and continue on with my GS-centric analysis? I think I should look into FDIC policies, because any sign of a turning of the tide from the FDIC will have a material effect on GS Bank and quite possibly on GS as a whole.

My absurd approach to analyzing and valuating GS

I know, I know. What purpose could analyzing GS' depository affiliate GS Bank first have for my overall analysis of the parent corporation? None. I think of it as a bottom-up approach where I randomly chose to analyze GS Bank first. Big whoop. I will be moving up the entire corporate ladder though and getting into the nitty gritty as much as possible. In the meantime, I will be fascinated with the route I've embarked on. GS Bank is an oddball in the world of depository institutions. It's not as established as JPM nor does it have the street presence of Citi or Wells Fargo.

Financial Trend Comparison of GS Bank

I'm going to compare the percentages of financial figures to the peer group average of GS Bank. Here's the percentage of total assets of non interest yielding cash and due from bank balances compared to the figures for the peer group average. (These charts I will be using have the y axis in percentages.) The information I've gathered comes from the FDIC.

Seems like GS Bank is very savvy since they have such little non yielding cash. I suppose they run the risk of not having cash when needed (say for like a bank run) but GS Bank has the backup of the big umbrella corporation GS. Besides, .25% of total assets of GS Bank is = more than $220M of cash and GS Inc has nearly $40B at that. The latest percentile rankings has GS Bank at 8. This seems like a rather benign idiosyncracy yet telling of the importance not to have non yielding cash.
Here's total investments which I define as interest bearing bank balances, fed funds sold and resales, trading account assets, held to maturity securities, and available for sale securities:

This is incredible for a "depository" and "lending" institution. Here are the latest percentiles: 95 in interest bearing bank balances and also in fed funds sold and resales; 99 in trading account assets, 35 in held to maturity securities, and just 3 in available for sale securities.

Above you see that fed funds (an extremely safe non risky investment) are going down at GS Bank from their extremely high levels. Better than holding cash, though it is. Below is the percentages of total investments minus the fed funds sold.

Here's a profile of GS's overall financials

I forgot to post this along with the financials of GS bank. I couldn't find quarterly information on net income for the last quarter of each year so...but it's not a big deal since this is just a quick profile.

                           Total Assets          NI(3 mo. ending)          Total Equity
12/31/08         $884,547                                                     $64,369
3/31/09           $925,290                    $1,814                         $63,553
6/30/09          $889,544                     $3,435                        $62,813
9/30/09           $882,185                    $3,188                       $65,354
12/31/09        $848,942                                                       $70,714
3/30/10         $880,528                      $3,456                        $72,944
6/30/10          $883,188                     $613                            $73,819
9/30/10         $908,679                      $1,898                         $75,657
12/31/10       $911,332                                                          $77,356
3/31/11          $933,289                     $2,735                         $72,469

I got some more financials about GS bank coming today.

Let me end this post with a message about how disturbed I am by the debt deal. To me and the vast majority of economists, deficit reduction and spending cuts is not what is needed for the economic health of the USA and the world to a degree. I wonder how the Wall Street types are reacting to this. They should know very well that deficit reduction will not be good. I understand that they have some beef with Obama for having cast them as the bad guys after having wooed them. But, smart money has to be moving against deficit reduction. For all the power that Wall Street has, I don't wonder why aren't they pressuring congressional leaders to change course, I wonder what plans have they already made for us to change course. Sure, corporate profits are nice right now, but they would be even nicer if the American consumer regains their consumption patterns.

Profile of GS

OK, so GS can be compartmentalized into 2 different FDIC-insured banks (one a depository institution, the other a trust company), a broker-dealer business, and an investment banking business (which in my mind encapsulates its private equity operations). There may be other business lines that don't fall into one of these aforementioned compartments that I haven't yet discovered.

I'm going to harp on the financial institution at first in my analysis. It's part of "peer group 1" which the FDIC defines as banks with more than $3B in assets. There are 177 banks in this peer group. The address of the overall headquarters is 200 West Street New York, NY 10282 and its website is http://www2.goldmansachs.com/ . It was founded in 1869.

OK, so its regulators are a hodgepodge of government agencies, being that their structure is a hodgepodge of operations. FDIC regulators are not its main regulator, though FDIC does regulate its retail depository institution and also its trust company. It's main American regulators are the Federal Reserve and the SEC. Its trust company is regulated by the OCC. A good website that summarizes many of the changes of its structure as a result of the financial bank bailout is http://www.thesunshinereport.net/marksunshine/?cat=81. I do not know yet what other nations may regulate GS, if at all.

Here are some financials on the FDIC insured depository bank from the FDIC website.

                 Total Avg Assets    Total Deposits        NI          Total Equity
12/31/08   67,369                    45,049                 (250)       18,677
3/31/09     161,249                  52,227                 1,209       19,878
6/30/09     155,574                  35,544                 1,686       20,367
12/31/09   111,394                  32,727                 3,677       22,373
3/31/10     93,739                    31,278                 524          22,895
6/30/10     90,966                    30,398                945           23,324
9/30/10     96,588                    31,596                1,247        23,627
12/31/10   95,483                    32,306                1,199        23,775
3/31/11     88,594                    32,281                 317          19,097

Its CEO, President, Chairman, COO, CFO, Directors, and Senior Execs can be found at
http://www2.goldmansachs.com/our-firm/our-people/leadership/board-of-directors.html#ClaesDahlbäck
I hope to look into each one of these individuals' biographies to get that much more a detailed understanding of the institution.

Estimated number of employees according to its website is 1,892.

Its business principles are found at http://www2.goldmansachs.com/our-firm/our-people/business-principles.html%20It's . It's a rather lengthy list of principles. I find it a little interesting that GS doesn't do the whole vision and mission statement thing. Though the first of its list of principles is highly suspect from what  I have read about its dealings in the mortgage backed securities market in the runup to the financial crisis of 2007-2008, "Our clients' interests always come first. Our experience shows that if we serve our clients well, our own success will follow."

Even lengthier than its list of principles is its length of products/services offered. Here's the list: advising in environmental markets and mergers and acquisitions, bank loans, financing of commercial mortgage capital, debt financing, financing in equity capital markets, lender financing, public sector and infrastructure financing, specialty lending, urban investments, asset management, bank deposits, closed ended investments, direct private investing, mutal funds, private wealth management, managed accounts, securitised products, structured fund solutions, securitised derivatives, clearing services, execution services, fund administration, pensions, endowments and foundations, prime brokerage, securities lending, transition services, global investment research. There are services tailoredfor individuals, institutions, investment advisors, and hedge funds.
You can find information about each on its website I already provided above. Lastly, I intended to post information regarding rates offered by GS Bank, but there is no information online. I imagine I'd have to call them to get deposit and loan rate information, but I figure it's not worth it. They probably offer extremely competitive rates.