Goldman executives take victory lap in debate over business model

By Lauren Tara LaCapra

NEW YORK (Reuters) - Senior Goldman Sachs Group Inc (GS.N) executives took a victory lap on Tuesday, telling an investor conference that the bank's recent results show they have been right all along about its trading-heavy business model.

Goldman's top brass have been arguing for years that a business lull that began in 2010 was "cyclical" and would eventually end. Volatility would pick up again, they said, and clients would go back to trading and doing big deals. The bank might regret dramatic changes that rivals were making, like exiting certain trading businesses, they said.

That insistence in the face of slouching revenue rankled investors who felt management wasn't doing enough to respond to market changes that might be permanent.

But on Tuesday, Goldman Chief Operating Officer Gary Cohn trumpeted the bank's recent achievements, including its best quarterly profit in five years. Those first-quarter results came from capitalizing on market volatility that executives had long predicted, Cohn said.

"We can grow revenue infinitely," Cohn said at the Deutsche Bank Global Financial Services conference. "You wouldn't like the (return-on-equity) effect of it, but we could grow revenue. We've consciously chosen to grow accretive revenue - and that's hard."

Goldman's revenue from trading commodities, currencies and interest rates products has risen by 2.6 times, on average, in recent quarters when volatility spiked, according to Cohn's presentation, which was sprinkled with examples of how the bank has stayed ahead of the game and performed better than peers.

For instance, Goldman has used technology to assess the return-on-equity of deals and trades under new capital rules for several years. Rivals seem to have only recently begun to do the same, Cohn said.

"We do believe our competitors are now starting to get to that level of conversation with their clients," Cohn said. That may help Goldman because if rivals are also looking closely at ROE, that makes them less likely to sell products and services at firesale prices that undercut the investment bank.

In what may have been the most "I told you so" moment of the event, an analyst asked Cohn and Chief Financial Officer Harvey Schwartz, also on stage, whether they are satisfied with Goldman's business mix. Their pithy responses drew laughter from the crowd.

Cohn: "I like our business mix. You like our business mix?"

Schwartz: "I like it, yeah."

Cohn: "We like it."

Schwartz: "I feel good about it, Matt."

(Changes word in last paragraph to Matt instead of man)

(Reporting by Lauren Tara LaCapra; Editing by Christian Plumb and Alan Crosby)