Goldman plans major reorganization to combine key units -sources

Goldman plans major reorganization to combine key units -sources

LONDON/NEW YORK, Oct 16 (Reuters) – Goldman Sachs (GS.N) is planning a major reorganization to consolidate its largest businesses into three divisions, with its investment banking and trading businesses merged into a single unit, two people familiar with the case told Reuters.

The plans are expected to be announced Oct. 18 alongside Goldman’s third-quarter results. Marcus, Goldman’s consumer banking business, will be absorbed into the wealth management unit, the sources said, confirming an earlier Wall Street Journal report.

A Goldman Sachs spokesperson declined to comment.

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It’s the biggest shake-up since the company’s Investor Day in early 2020, when it outlined plans for four core units: investment banking, global markets, consumer and wealth management and management. of assets.

“It’s a headache,” said Wells Fargo banking analyst Mike Mayo. “Right now, there are more questions than answers for Goldman Sachs regarding this potential restructuring.”

The company’s stock rose 2.2% on Monday, underperforming the broader S&P 500 index (.SPX) which rose 2.6%.

The reorganization comes as the Wall Street titan seeks to increase its revenue from fee-based businesses and reduce its reliance on volatile trading and investment banking revenue. The changes also signal that Marcus, the consumer unit, is being relegated after CEO David Solomon expressed high ambitions to build a digital consumer bank.

“It may be a way to put Marcus on the backburner to downplay its importance as an investment opportunity,” Mayo said.

Solomon, who became CEO in 2018, has sought to expand Goldman’s footprint in retail banking since his early days at the helm.

But the consumer banking unit that was launched in 2016 has struggled to gain traction and suffered from delays. Marcus has yet to launch a checking account planned for this year. By mid-year, the bank was internally forecasting that Marcus’ losses would accelerate to more than $1.2 billion in 2022, for cumulative losses of more than $4 billion, Bloomberg reported. Goldman declined to comment on the loss.

Solomon said the company could generate more than $4 billion in revenue by the end of 2024.

The retail banking unit’s net revenue rose 23% to $1.49 billion in 2021, reflecting an increase in credit card and deposit balances, the bank said in its annual report.

Marcus offers digital banking products such as loans, savings and certificates of deposits. It also provides credit cards through a partnership with Apple Inc (AAPL.O).

The consumer business serves more than 14 million customers and had more than $100 billion in deposits with more than $16 billion in card and loan balances, the bank said.

REVISION KEEPS MANAGEMENT “ON ITS TOES”

The combined investment banking and trading group will be overseen by Dan Dees and Jim Esposito, who are currently co-global heads of Goldman’s investment banking, and Ashok Varadhan, now co-head of its global markets division. , according to Bloomberg.

Marc Nachmann, global co-head of the bank’s global markets division, will move in to help manage the combined asset and wealth management arm, according to the report.

Marcus will be part of the asset and wealth management unit, the report adds.

“It’s a way for Goldman Sachs to keep its management team on their toes and reinforce the intensity that defines Goldman,” Mayo said.

Such an organizational overhaul of the bank comes shortly after its global job cuts in September that could have affected hundreds of bankers.

In the second quarter, Goldman reported a 48% drop in profits, which beat forecasts, as trading in fixed income and commodities surged.

Like its Wall Street rivals, the bank is expected to post a sharp drop in net profit in the third quarter as investment banking revenue was hit hard by a slump in trading.

Goldman is expected to post third-quarter net profit of $2.77 billion, according to analyst forecasts compiled by Refinitiv, up from $5.38 billion a year earlier.

Given the challenging operating environment, Goldman is closely reviewing all of its future spending and investment plans to ensure the best use of its resources, Barclays said in a recent report.

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Reporting by Pamela Barbaglia in London, Lavanya Ahire and Akriti Sharma in Bengaluru, Selena Li in Hong Kong, Saeed Azhar and Lananh Nguyen in New York; Editing by Sherry Jacob-Phillips, Muralikumar Anantharaman and Nick Zieminski

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