CEO of Goldman Sachs, planning changes
According to a rumor, Goldman Sachs CEO David Solomon is preparing a significant reorganization of the Wall Street behemoth that will combine the company’s investment banking and trading operations under a single roof and condense its major businesses into a few entities.
The new mega-unit will be led by Dan Dees, Jim Esposito, and Ashok Varadhan, according to the Wall Street Journal, which cited unnamed sources. The new mega-unit combines two crucial divisions that were once seen as rivals; former CEO Lloyd Blankfein came from the trading unit, while his successor Solomon came from investment banking.
Insiders speculate that Chief Executive Solomon’s third attempt at corporate restructuring, the corporate rejiggering, aims to elevate bankers over traders to key positions. Combining Dees and Esposito, who jointly lead the investment bank, with Varadhan, jointly leading global markets, will give bankers a disproportionate amount of control over the new entity.
Additionally, Goldman’s army of traders, who remark that the company has historically been a “trading shop,” is concerned that this may harm their chances of moving up the ranks and that bankers will be given preference over them. A person close to Goldman noted that this type of restructure “isn’t designed to happen as soon as it’s happening.” But it appears like David Solomon is taking action to forward his goal, which is a hint that he doesn’t see himself reversing course.
The source continues, “The new grouping also raises regulatory problems regarding who will have access to critical non-public information obtained by bankers during dealmaking.” The idea that consolidating all of Goldman’s revenue sources would leave the other companies as orphans is another issue.
According to a source with direct knowledge of the matter, there has long been a perception that Goldman is unduly dependent on its banking and trading divisions’ revenue streams.
Meanwhile, according to a separate story from Bloomberg, asset and wealth management would be linked with the failed Marcus consumer lending bank under a different roof. Who will be in charge of the new team is unknown. According to Bloomberg, Stephanie Cohen, who has co-led Consumer and Wealth Management, will be given control of Platform Solutions, a consumer bank division that will work with the bank’s corporate clients.
The announcement of the modifications might happen as soon as this week. On Tuesday, Goldman Sachs is expected to release its quarterly earnings.
The decision to merge Marcus with other, more profitable companies was made as a result of the consumer lender’s repeated failure to meet revenue projections and profit targets, sources told The Washington Post.
Marcus may be the main factor in the reorganization, sources told The Post. The consumer bank, which is reportedly losing up to a billion dollars annually, has not succeeded in bringing in the money or creating the buzz that management had hoped for.
With this rearrangement, “Marcus is a complete failure… and they’re going to attempt and bury the elements of the retail banking disaster,” the source continues. A Goldman Sachs representative declined to corroborate the report or offer any additional commentary.
The positions of Julian Salisbury and Luke Sarsfield, who have been in charge of asset management, will be eliminated. Bloomberg reports that Salisbury will be appointed chief investment officer and Sarsfield will go back to selling for asset management.
The third business will group the company’s financial technology endeavors, including its agreements with Apple and General Motors, with transaction banking in the same division. This department will be led by Marc Nachmann, who also serves as co-head of trade, according to Bloomberg.
According to Bloomberg, the action undoes the bank’s most recent restructuring, which David Solomon finished in 2020 and aims to highlight its most lucrative divisions.
The Wall Street Journal broke the story of the company’s restructuring, while Bloomberg broke the story that the asset, wealth, and consumer businesses may be combined.
Insiders believe Goldman may be attempting to inflate its figures with investors as it announces ambitious new ambitions, especially given that the company’s shares are now trading at just 0.9 times book value, according to FactSet.
That amount is considerably less than the 1.4 times the book value at which Morgan Stanley shares and the 1.3 times the book value at which JPMorgan shares are traded.
Many employees at the bank are already on edge due to impending layoffs when word of the reorganization is announced.
According to Mike Mayo, banking analyst at Wells Fargo, “a new reorganization boosts intensity on management and staff to produce…this allows wiggle room to remove a few more.” “They might be selecting who is redundant,”