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Blankfein Sit-Down: Goldman Just Gotta ‘Be Goldman’ Globally

Goldman Sachs Chief Executive Lloyd Blankfein and Chief Financial Officer David Viniar said that the firm’s No. 1 priority for the new year is growing its business overseas, according to recent sit-down with an analyst. The comments follow a decade of achieving record profitability domestically, but in the process denting its ‘clients first’ image and opening the door for heavy regulation for its involvement in marketing and trading in toxic mortgage-backed securities in this country.

Goldman’s “growth strategy remains to ‘be Goldman in more places,’” wrote Glenn Schorr, a well-respected banking analyst at Nomura who landed the rare interview, in a note to clients. “Most of the firm’s businesses (financing, M&A, equity underwriting, equity trading, asset management, etc.) do best when there is healthy GDP growth. Right now, the biggest pockets of GDP growth continue to be in emerging markets.”

Goldman Sachs
Source: goldmansachs.com
Goldman Sachs

Shares of the firm doubled in 2009 as investors flocked to the investment bank that appeared to survive the crisis in the best shape. But the stock has struggled this year, virtually unchanged, as negative headlines forced traders to take profits.

In July, Goldman Sachs paid $550 million to settle SEC charges that it misled investors in a subprime mortgage product. Along with paying the largest ever fined levied against a Wall Street firm, Goldman acknowledged that its marketing materials contained “incomplete information” and promised to reform its business. The stock is up 20 percent since that settlement.

Despite its reputation hit this year, Schorr argues that Goldman globally is “finding clients who are looking for Goldman’s global expertise.” Schorr, who noted that developing markets made up just 12 percent of the firm’s revenue since 2006, believes global expansion could push the shares up 10 percent next year.

Some investors have their doubts, citing strong M&A performance of Morgan Stanley in China, JPMorgan’s growing asset management in Southern China and Citigroup’s long-time retail presence in the country.

“It was the also-rans that built out there for years because they weren’t doing as well as Goldman here,” said Zachary Karabell, President of River Twice Research and one-time manager of a successful China-focused fund at Fred Alger and Co. “Blankfein’s marketing an image globally that’s seen better days.”

In the Schorr interview, Goldman’s top two went on to cite a rebound in fixed income trading, an investment banking comeback and organic growth in its asset management business as other reasons to be optimistic about the new year.

“Lloyd listed investment banking as the business that likely has the most potential upside next year,” said Schorr in the note.

“I do believe that investment banking will be the top area going forward for the large brokers,” said Stephen Weiss, founder of Short Hills Capital. “We’ve seen the bubble in bonds start to leak, so credit has peaked. Prop trading is gone and there is more transparency on derivatives ahead.”

So if the firm’s new motto is “aiming to be Goldman in more places,” like Schorr says, then get ready world, you’re about to find out what “being Goldman” will mean.

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Trader disclosure: On December 20, 2010, following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL), (BAC), (FXI); Terranova owns (CRM), (VRTS), (C), (UPL), (PEP), (GS), (OXY), (NKE); Terranova owns Gold puts; Adami owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Adami's wife works at (MRK); Pete Najarian owns (BBY) calls; Pete Najarian owns (C); Pete Najarian owns (GE); Pete Najarian owns (MS); Pete Najarian owns (PFE); Pete Najarian owns (V) call spreads; Pete Najarian owns (YHOO)

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