Goldman Sachs plans a major restructuring to combine investment banking and trading division, Goldman, has offices in New York and will report third-quarter results this week.
One of the biggest reorganizations in the history of the Wall Street company has been completed.
People familiar with the matter said Goldman Sachs will combine its core investment banking and trading businesses into one entity and its wealth and wealth management businesses into a separate entity.
The people said Goldman’s consumer banking division, Marcus, will become part of its wealth and wealth management unit. The third division includes transaction banking, the bank’s portfolio of financial technology platforms, specialty lending firm He GreenSky, and joint ventures between Apple and General Motors, the people said.
The reorganization could be announced within days, the company said. Goldman is due to report third-quarter results on Tuesday.
It’s unclear how the move will shake Goldman’s management team, but at least some of them will assume new roles, the people said. They said Marc Nachman, co-head of the firm’s trading division, will head the combined unit of wealth and wealth management.
The reorganization is the latest step in Chief Executive David Solomon’s quest to shift Goldman’s focus to a company that generates consistent fees in all environments.
It also reflects some of its own executives’ views on the company’s struggle to overcome skepticism among investors and its consumer banking ambitions.
The company’s commercial and investment banking expertise has been Goldman’s calling card for decades, generating huge profits as the market favored risk-taking and bold trades. But investors often downplay these successes, arguing that they will be difficult to sustain if market conditions change. And in recent years, Goldman has tried to increase its focus on customer service in its trading arm.
After the change, Goldman’s org chart will look like its peers.
Goldman’s Investor Day 2020 slide presentation provided a glimpse of how it compares to its peers when combining banking and trading operations. At Goldman, the post-merger group delivered a 9.2% return on equity in 2019, bringing Morgan Stanley and Bank of America Corporation together. It has outperformed but has made less profit this year than JPMorgan Chase and Citigroup.
Bloomberg News previously reported that Goldman was planning to reorganize its consumer banking division and was considering merging its wealth management and wealth management businesses.
At least in one key metric, Goldman shares struggle to keep up with their peers. The company was trading at 0.9 times its book value in June, according to FactSet, compared to Morgan Stanley’s 1.4x and JP Morgan’s 1.3x.
Goldman sought to close the gap by upgrading Wall Street’s most valuable companies. Managing the money of wealthy people and overseeing the funds of pensions and other well-funded institutions is more profitable than other financial services and generally does not jeopardize a company’s balance sheet. Many investors also find traditional consumer finance (deposits and loans) more predictable.
Goldman has invested heavily in establishing its own consumer bank, and integrating this unit into its wealth management division should give it more opportunities to provide banking services to wealthy individuals.
The bank stated earlier this year that it aims to earn $10 billion in wealth and wealth management fees by 2022.