Observers question the merits of the expected move, but say it could streamline the historic Wall Street firm. Experts are also puzzled about the future of Marcus, Goldman’s digital consumer bank, for which chief executive David Solomon had big ambitions to tap high street clients.
“They’ve certainly innovated with Marcus… But the reality is: what’s the cost of the money they’re bringing in?” said Chris Marinac, director of research at Janney Montgomery Scott.
Goldman had to invest heavily to grow Marcus’s business and offered savers a much higher rate of return than its retail rivals for putting their money with them.
The group’s reorganization will merge its investment banking and trading businesses into a single entity, 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 published on Tuesday alongside Goldman’s third-quarter results, which are expected to show a sharp drop in net profit due to the slowdown in trading.
It is the company’s biggest shake-up 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 spokesman for Goldman Sachs declined to comment.
This restructuring 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 downplay its importance as an investment opportunity,” Wells Fargo banking analyst Mike Mayo said.
Goldman is refocusing on its core business, Janney Montgomery Scott’s Marinac said.
“They’re good at trading, good at investment banking,” Marinac said. “And even if those companies aren’t necessarily the best this quarter, they’re still a 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 retail banking footprint.
But the consumer banking unit, 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 by 2022, for accumulated 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 having net income of $1.49 billion in 2021. The unit had $100 billion in 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, 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 help lead the combined asset and wealth management arm, according to the report.
The reshuffle follows a series of global job cuts in September which 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.