Goldman plans sweeping reorganization, combining investment banking and trading

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Goldman Sachs Group Inc.

GS 2.24%

plans to consolidate its largest businesses into three divisions, undertaking one of the biggest shakeups in the Wall Street firm’s history.

Goldman will combine its flagship investment banking and trading businesses into one unit, while merging asset and wealth management into another, people familiar with the matter said. Marcus, the consumer banking arm of Goldman, will be part of the asset and wealth management unit, the people said.

A third division will house transaction banking, the bank’s fintech platform portfolio, specialty lender GreenSky and its joint ventures with Apple. Inc.

and General Motors Co.

people said.

The reorganization could be announced within days, the people said. Goldman is expected to release its third-quarter results on Tuesday.

It’s unclear how the makeover will shake up Goldman’s management team, though at least a few executives will have new roles, the people said. Marc Nachmann, the firm’s co-head of trading, will take over to help run the combined asset and wealth management arm, they said.

The reorganization is the latest step in chief executive David Solomon’s efforts to shift Goldman’s center of gravity toward businesses that generate stable fees in any environment. It also reflects the company’s struggle to overcome skepticism from investors and even some of its own executives about its retail banking ambitions.

The firm’s trading and investment banking acumen has been Goldman’s hallmark for decades, generating massive profits when markets favored risk-takers and bold trades. But investors have often ignored these successes, believing they are harder to sustain when market conditions turn around. And in recent years, Goldman has sought to strengthen its trading arm’s focus on customer service.

Following the changes, Goldman’s organization chart will more closely resemble its peers.

A slide presentation from Goldman’s 2020 Investor Day provided insight into what a combined banking and trading business would look like compared to its peers. At Goldman, the merged group would have delivered a return on equity of 9.2% in 2019, ahead of Morgan Stanley and Bank of America Corp.

but below what JPMorgan Chase & Co. and Citigroup Inc.

won that year.

Bloomberg News reported earlier that Goldman planned to restructure its consumer banking arm and considered combining its asset and wealth management businesses.

Goldman’s shares have struggled to keep pace with its rivals, at least by one measure. The company was trading at 0.9 times its book value in June, according to FactSet. That compares to 1.4 times at Morgan Stanley and 1.3 times at JPMorgan.

Goldman has sought to narrow the gap by bolstering companies with higher valuations on Wall Street. Managing the wealthy’s money and overseeing pension funds and other deep-pocketed institutions is more profitable than other financial services, and it doesn’t usually put the company’s balance sheet at risk. And many investors find traditional retail banking, i.e. deposits and loans, to be more predictable.

Goldman has invested heavily in building its own consumer bank, and integrating the unit into its asset and wealth management arm should create more opportunities to offer banking services to high net worth individuals.

Earlier this year, the bank said it was aiming to bring in $10 billion in asset and wealth management fees by 2024.

Write to Justin Baer at [email protected]

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Appeared in the print edition of October 17, 2022 under the title “Goldman to combine companies into 3 units”.

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