NEW YORK (Reuters) – Goldman Sachs Group Inc (GS.N) does not want or need to buy a commercial bank, Chief Financial Officer David Viniar said on Tuesday, countering market speculation that Wall Street companies need the stability of a deposit-taking business to survive the current turmoil.
Earlier this year there was rampant talk that Goldman was studying a bank takeover, specifically Wachovia Corp (WB.N), as it looked ahead to tougher market conditions and the prospect of stricter federal regulation.
Viniar said buying a bank was off the table.
“It’s really interesting when I hear people talking about the model doesn’t work because you have to have a deposit base, because the deposit base funds the banking assets,” he said in a news briefing.
“The capital markets businesses that we do, and that our commercial bank competitors do, are all funded in the capital markets — by us and by them.”
In recent weeks, analysts and investors have argued that the traditional Wall Street securities firms, and their reliance on funds from capital markets, was a creature of the past.
The collapse of both Bear Stearns and Lehman Brothers Holdings Inc (LEH.P), as well as Merrill Lynch & Co Inc (MER.N) rushing into a takeover by Bank of America Corp (BAC.N) has fueled speculation that Goldman and Morgan Stanley have little choice but to merge with a big, deposit-rich commercial bank.
Viniar said investors may be surprised to learn that when compared with big banks such as JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), UBS AG (UBS.N) and Bank of America, Goldman derives the lowest amount of its long-term debt from capital markets.
“The banking deposits fund the banking business, the capital markets fund the capital markets business. That’s the business model,” he said.
Ultimately, Viniar said, the troubles at other banks reflected mistakes made in tactics rather than in their business model.
“This is a performance question,” he said. “It’s tactics more than strategy.”
Past performance would appear to back up Viniar’s views. Until recently, Goldman generated the highest returns by far and suffered lower losses than commercial bank rivals thus far. It also has remained the top deal adviser and stock underwriter worldwide.
Five or six years ago “there was a big groundswell that the investment banks couldn’t compete independently,” Viniar told reporters in a briefing. “We wouldn’t get through five minutes of a meeting without talking about Goldman Sachs combining with a commercial bank. Well, it feels like we’ve been able to compete just fine.”
By Joseph A. Giannone and Elinor Comlay
(Editing by Jeffrey Benkoe)