Goldman Sachs said it was pulling out of its much-publicized foray into retail banking to focus more on its traditional strengths serving big corporations and wealthy investors as part of a major reorganization under Chief Executive David Solomon.
Solomon said the Wall Street powerhouse was trying to align its online retail banking operations with its wealth management business, adding that it was “a better place for us to focus than be on the lookout for consumers en masse.”
“The concept of being really broad with a consumer footprint isn’t really playing to our strengths,” he told CNBC. “But when you look at our wealth platform … the ability to add banking services to that and align with that really plays to our advantage.”
Goldman announced its restructuring while reporting third-quarter net income of $3.1 billion, or $8.25 per share, down 43 percent from the $5.4 billion, or $14.93 per share, ago. one year. That beat analyst estimates of $2.9 billion, or $7.75 a share, according to consensus data compiled by Bloomberg, but it was still the group’s fourth straight quarterly decline.
“Reducing consumption makes sense,” said Christian Bolu, a banking analyst at Autonomous Research. “It’s about really targeting existing customers, which are likely to be very high value, high net worth. . . instead of spending the money to go find new customers.”
Under the renovation, Goldman will merge its investment and commercial banking business into a single unit, as shrinks from four divisions to three. The plan was announced as the Wall Street bank grapples with a prolonged slowdown in investment banking fees.
“These organizational changes represent an important and purposeful evolution in our strategic journey, positioning ourselves well to deliver for our customers and unlock shareholder value,” Solomon said in a memo to employees seen by the Financial Times.
The move reflects the reality that Solomon has yet to convince investors that Goldman has changed substantially from the investment banking and trading-driven house it inherited four years ago, and deserves a higher stock multiple.
The reorganization, the bank’s second in less than three years, will split Goldman’s consumer business into two separate areas, reducing the importance of its push into consumer banking through online retail lender Marcus. Since its launch in 2016, Marcus has come under scrutiny from investors and internally after years of losses and rising costs.
The three divisions will be: a merged investment bank and business unit; a wealth and asset management division that will house Marcus; and the recently formed Platform Solutions business that comprises the rest of Goldman’s retail banking operations, such as its Apple Credit Card Association and online lender GreenSky, as well as the fledgling transaction banking business.
Goldman shares rose more than 2 percent in afternoon trading in New York.
In the third quarter, the group’s net income totaled $11.98 billion, down from $13.6 billion a year earlier but above analysts’ forecasts of $11.4 billion. Revenue from its trading division, which has benefited from strong activity during recent market volatility, beat analyst estimates.
