The Wall Street Journal reported on Sunday that Goldman Sachs is planning a major reorganisation. As part of this change, its well-known investment banking and trading businesses will be combined, and its wealth unit will take over its consumer banking business.
Under CEO David Solomon, the Wall Street giant has been trying to reduce its reliance on volatile trading and investment banking revenue by growing its fee-based businesses and putting more attention on its Marcus consumer banking unit.
People who know about the plans told the WSJ that Goldman will split its biggest businesses into three parts. The plans are expected to be made public in the next few days.
A report said that Goldman will combine its investment banking and trading businesses into one unit, and its asset and wealth management businesses into another. This is one of the biggest changes Goldman has ever made.
According to the report, Marcus will be assigned to the Asset and Wealth Management division.
WSJ says that a third division will be in charge of transaction banking and the bank’s collection of financial technology platforms.
The report says that changes to the bank’s top leadership are still unknown, but at least a few executives will have new jobs. It was said that Marc Nachmann, who is the co-head of the bank’s Global Markets Division around the world, will move to help run the combined asset-and wealth-management arm.
Goldman, which will report its earnings for the third quarter on Tuesday, did not want to say anything.
This kind of reorganisation of the bank would happen soon after the September job cuts that could have affected hundreds of bankers around the world.
Goldman’s profit for the second quarter fell by 48%, which was better than expected because of gains in fixed-income and commodities trading.
Like its Wall Street competitors, the bank is likely to report a sharp drop in net profit for the third quarter. This is because investment banking revenue fell sharply because fewer deals were made.
Analysts predict that Goldman will make a net profit of $2.77 billion in the third quarter, which is down from $5.38 billion in the same period last year.
Barclays (LON:BARC) said in a recent report that Goldman is closely re-examining all of its future spending and investment plans to make sure it is making the best use of its resources. This is because of the tough business environment.
As part of the restructuring, the consumer banking unit and asset and wealth management will be combined. The consumer banking unit is a new project that started in 2016, but it is still having trouble getting off the ground.
Marcus has had some setbacks—it hasn’t launched a checking account yet, even though it said it would earlier this year—and is said to be burning cash. According to Bloomberg News, the bank predicted internally that the unit’s losses would get worse and reach more than $1.2 billion in 2022. This means that the total losses will be more than $4 billion. Goldman refused to say anything.
Solomon has said that by the end of 2024, the business could make more than $4 billion. The bank said in its annual report that its net income from consumer banking grew by 23% to $1.49 billion in 2021. This was due to higher credit card and deposit balances.
Marcus was a digital banking platform that offered things like loans, savings accounts, and certificates of deposit. It also offered credit cards through a partnership with Apple Inc. (NASDAQ:AAPL). The consumer business has more than 14 million customers and more than $16 billion in credit card and loan balances, according to the bank.
