Goldman Sachs Restructures Again to Focus on Trading and Investment Banking

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Goldman Sachs bankers are back in the office en masse to celebrate a solid quarter, but they might be a little confused about where to sit.

The megabank reported better-than-expected third-quarter earnings Tuesday, but those fairly positive numbers come alongside warnings of a recession and a business restructuring that’s created a massive shake-up inside the investment banking behemoth.

Super Bold Shuffle

It’s rare for one of the biggest banks in the world to restructure for the second time in just four years. Goldman CEO — and weekend DJ — David Solomon first remixed the company after taking the helm in 2018, trimming traders, ditching the opaque “Investing and Lending” unit and championing the firm’s consumer banking efforts in hopes of appealing to Main Street and not just Wall Street.

Goldman was the last major bank to report on Tuesday, and while it handily beat expectations with net income of $3.1 billion, that figure still marks a 43% decline over last year’s results and was by far the worst among its peers. Goldman’s meaningful valuation gap — it trades at a steep discount to peers like Morgan Stanley on a price-to-book basis — has forced Solomon to reshuffle his reshuffle:

  • Goldman’s three new divisions will consist of wealth management, global banking, and markets and platform solutions. The goal is to get back to basics and bring the firm’s highly profitable trading and investment banking businesses under one roof – and bonus pool – that can still generate Goldman-esque fees in any economic environment, The Wall Street Journal reported.
  • In a signal that Solomon is abandoning his goal of looking more like Bank of America or JPMorgan, the company’s money-losing, slow-growth consumer ventures like the Marcus, Apple credit card, and GreenSky will be absorbed across other divisions. “They’ve definitely innovated with Marcus,” Chris Marinac of Janney Montgomery Scott told Reuters. “But the reality is, what’s the cost of money that they’re bringing in?”

Worst is yet to come: Goldman Sachs is often seen as Wall Street’s canary in the coal mine. So it wasn’t taken lightly when Solomon told CNBC “there’s a good chance that we have a recession in the United States.” JP Morgan Chase CEO Jamie Dimon said the same just last week, and a Bloomberg Economics forecast said there is a 100% probability the US enters a recession in the coming 12 months.