Goldman Sachs plans major overhaul to merge key divisions: sources

Oct 16 (Reuters) – Goldman Sachs (GS.N) is planning a major restructuring to combine its biggest businesses into three divisions and combine its well-known investment banking and trading businesses into one, a person familiar with the matter told Reuters. .

The plans are expected to be announced in October. Along with Goldman’s third-quarter earnings on the 18th, consumer banking will also be absorbed by its wealth division, the sources said, confirming an earlier Wall Street Journal report.

A Goldman spokesman declined to comment.

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The move comes as the Wall Street giant seeks to reduce its reliance on volatile trading and investment banking income by boosting its fee-based business.

That means CEO David Solomon’s ambitions to build a mass-market digital bank through consumer banking unit Marcus will take a back seat.

The combined investment banking and trading group will be overseen by Dan Dees and Jim Esposito, currently global co-heads of investment banking at Goldman Sachs, and Ashok Varadhan, currently co-head of Goldman’s global markets division, Bloomberg reported.

Marc Nachmann, the bank’s global co-head of global markets, will help run the combined asset and wealth management unit, the Journal said.

Marcus will become part of the Asset and Wealth Management division, the report added.

Goldman Sachs, which reported third-quarter earnings on Tuesday, declined to comment.

Such an organizational overhaul comes shortly after global layoffs in September that could affect hundreds of bankers.

Goldman Sachs reported that second-quarter profit fell 48%, beating expectations, on growth in fixed income and commodities trading.

Marcus Delay

Like its Wall Street rivals, the bank expects a sharp drop in third-quarter net profit as investment banking revenue is heavily impacted by a slump in trading.

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

Given the difficult operating environment, Goldman Sachs is closely re-examining all of its forward-looking spending and investment plans to ensure it is making the most of its resources, Barclays said in a recent report.

Since Solomon’s early years at the helm of the company, he has wanted to make significant strides in retail banking. But the consumer banking segment, launched in 2016, is still struggling to gain traction and will be subsumed into asset and wealth management.

Marcus has suffered some delays — it has yet to launch a checking account it said earlier this year would launch this year — and it is reportedly burning through cash.

In the middle of the year, the bank internally predicted that losses at the unit would accelerate to more than $1.2 billion in 2022, according to Bloomberg, which would imply a cumulative loss of more than $4 billion. Goldman Sachs declined to comment.

Solomon has said in the past that the business could generate more than $4 billion in revenue by the end of 2024.

In its annual report, the bank said net income from personal banking rose 23% to $1.49 billion in 2021, reflecting increases in credit card and deposit balances.

Digital banking platform Marcus offers products such as loans, savings and certificates of deposit, as well as credit cards through a partnership with Apple Inc (AAPL.O).

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

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

Our Standard: The Thomson Reuters Trust Principles.

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