Observers question the merits of this expected move, but say it could streamline the historic Wall Street firm. Experts are also puzzled over the future of Marcus, Goldman’s digital consumer bank, for which chief executive David Solomon had big ambitions in order to exploit high street customers.
“They have certainly innovated with Marcus… But the reality is: what is the cost of the money they bring in?” said Chris Marinac, director of research at Janney Montgomery Scott.
Goldman had to invest significantly to grow Marcus’ business and was offering savers a much higher rate of return than its retail rivals to put their money with them.
The group’s reorganization will merge its investment banking and trading businesses into a single unit, two people familiar with the matter told Reuters. Marcus will be absorbed into the bank’s asset and wealth management unit, the sources said, confirming an earlier Wall Street Journal report.
The plans are expected to be announced on Tuesday alongside Goldman’s third-quarter results, which are expected to show a sharp decline in net profit due to the slowdown in trading.
It’s the company’s biggest shakeup since the company’s Investor Day in early 2020, when it outlined plans for four main units: investment banking, global markets, consumer and wealth and asset management.
A Goldman Sachs spokesperson declined to comment.
This reshuffle comes as the titan of Wall Street seeks to increase its income from fee-based activities.
“This may be a way to push Marcus into the background to de-emphasize its importance as an investment opportunity,” said Wells Fargo banking analyst Mike Mayo.
Goldman is refocusing on its core business, Janney Montgomery Scott’s Marinac said.
“They’re great at trading, great at investment banking,” Marinac said. “And while those businesses aren’t necessarily the best this quarter, they’re still good business. In the long run, it’s a winning business, so you can’t hit them at all.”
Still, some observers said the logic behind the expected changes remains unclear.
Since becoming CEO in 2018, Solomon has sought to expand Goldman’s footprint in retail banking.
But the consumer banking unit that was launched in 2016 has struggled to gain traction and suffered from delays. Marcus has yet to launch a checking account that was planned for this year.
Internally, the bank has projected Marcus’ losses to accelerate to more than $1.2 billion in 2022, for cumulative losses of more than $4 billion, according to Bloomberg. Goldman declined to comment on the loss.
Solomon said the company could generate more than $4 billion in revenue by the end of 2024, while it posted net income of $1.49 billion in 2021. The unit had $100 billion of deposits and serves 14 million customers.
Marcus offers digital banking products such as loans, savings and certificates of deposit. It also provides credit cards through a partnership with Apple Inc.
The combined investment banking and trading group will be overseen by Dan Dees and Jim Esposito, who are currently global co-heads of Goldman’s investment banking division, and Ashok Varadhan, currently co-head of its investment banking division. world markets, according to Bloomberg.
Marc Nachmann, the current global co-head of global markets, will move to help lead the combined asset and wealth management arm, according to the report.
The reshuffle follows a series of global job cuts in September that could have affected hundreds of bankers.
“It’s a way for Goldman Sachs to keep its management team on edge and reinforce the intensity that defines Goldman,” Mayo said.