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Goldman Sachs announces reduction in asset management investments

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Goldman Sachs head of personal finance management Joe Duran provides his 2023 market outlook and discusses the firm’s ‘tough decision’ to cut 3,200 jobs on ‘Varney & Co.

Goldman Sachs Group Inc’s asset management section will make significant cuts to the $59 billion of alternative investments that impacted its earnings.

Alternative assets can include private equity or real estate instead of traditional investments like stocks and bonds.

The firm will divest its positions over the next few years and replace some of those funds on its balance sheet with external capital, according to Julian Salisbury, chief investment officer of asset and wealth management at Goldman Sachs.

“I would expect to see a meaningful decline from the current levels,” Salisbury told Reuters. “It’s not going to zero because we will continue to invest in and alongside funds, as opposed to individual deals on the balance sheet.”

FEDERAL RESERVE INVESTIGATING GOLDMAN SACHS’ CONSUMER BUSINESS

Goldman Sachs Group Inc’s asset management section will make significant cuts to the $59 billion of alternative investments that impacted its earnings. (Reuters Photos)

Goldman Sachs had a poor fourth quarter, when it missed Wall Street profit targets by a substantial margin. The bank is firing more than 3,000 employees in its biggest round of job cuts since the 2008 financial crisis.

The bank’s asset and wealth management posted a 39% drop in net revenue to $13.4 billion in 2022, with its revenue from equity and debt investments declining 93% and 63%, respectively, according to earnings announced last week.

The $59 billion of alternative investments held on the balance sheet dipped from the prior year’s $68 billion, according to the results. The positions included $15 billion in equity investments, $19 billion in loans and $12 billion in debt securities, as well as other investments.

“Obviously, the environment for exiting assets was much slower in the back half of the year, which meant we were able to realize less gains on the portfolio compared to 2021,” Salisbury said.

Salisbury expects to see “a faster decline in the legacy balance sheet investments” if the environment for asset sales improves.

CONCERNS OVER A ‘WHITE COLLAR RECESSION’ GROW AS GOLDMAN SACHS, MORGAN STANLEY, AMAZON AND OTHERS CUT JOBS

The firm will divest its positions over the next few years and replace some of those funds on its balance sheet with external capital. (REUTERS/Andrew Kelly/File Photo / Reuters Photos)

“If we would have a couple of normalized years, you’d see the reduction happening” during that period, he said.

He also said clients are showing interest in private credit because of poor capital markets.

“Private credit is interesting to people because the returns available are attractive,” Salisbury said. “Investors like the idea of owning something a little more defensive but high yielding in the current economic environment.”

Goldman Sachs’ asset management arm closed a fund of more than $15 billion earlier this month to make junior debt investments in private equity-backed businesses. Private credit assets in the industry have more than doubled to more than $1 trillion since 2015, according to data provider Preqin.

Investors are also growing interested in private equity funds and are trying to purchase positions in the secondary market when existing investors sell their stakes, Salisbury said.

The bank is firing more than 3,000 employees in its biggest round of job cuts since the 2008 financial crisis. (Getty Images)

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The U.S. investment-grade primary bond market began the new year with a number of new deals.

Salisbury said the market rally has “more legs” because investors are willing to buy bonds with longer maturities while also looking for higher credit quality due to the uncertain economic environment.

Goldman Sachs economists predict the Federal Reserve will raise interest rates by 25 basis points each in February, March and May before holding steady for the rest of the year, Salisbury said.

Reuters contributed to this report.

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Goldman misses profit estimates as dealmaking slumps, consumer business hit

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Jan 17 (Reuters) – Goldman Sachs Group Inc (GS.N) on Tuesday reported a bigger-than-expected 69% drop in fourth-quarter profit as it struggled with a slump in dealmaking, a drop in asset and wealth management revenue and booked losses at its consumer business.

Wall Street banks are making deep cuts to their workforce and streamlining their operations as dealmaking activity, their major source of revenue, stalls on worries over a weakening global economy and rising interest rates.

Goldman is also curbing its consumer banking ambitions as Chief Executive Officer David Solomon refocuses the bank’s resources on strengthening its core businesses such as investment banking and trading.

Solomon confirmed that the bank was cutting 6% of its headcount, or around 3,200 jobs, and was making changes to the consumer business to navigate an uncertain outlook for 2023.

“We tried to do too much too quickly,” he said about the consumer business such as its direct-to-consumer unit Marcus. “We didn’t execute perfectly on some so we’ve taken a hard look at those, and you make adjustments.”

Goldman reported a net loss of $660 million at its platform solutions unit, which houses transaction banking, credit card and financial technology businesses, as provisions for credit losses grew while the business was expanding.

Full-year net loss for the platform solutions business was $1.67 billion, the bank said, even though net revenue of $1.50 billion for 2022 was 135% above 2021.

Goldman on Tuesday confirmed that it is planning to stop making unsecured consumer loans after it moved Marcus into its asset and wealth management arm. The checking account launch for Marcus has also been postponed.

Goldman’s investment banking fees fell 48% in the latest quarter, while revenue from its asset and wealth management unit dropped 27% due to lower revenue from equity and debt investments.

Solomon said the investment banking outlook could be better in the “back half” of 2023, as people are softening their views on the economic outlook for this year.

Shares were down nearly 7% at $347.66 in midday trade.

[1/2] The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly

Reuters Graphics Reuters Graphics

GROWING COSTS

Wall Street’s biggest banks have stockpiled more rainy-day funds to prepare for a possible recession, while showing caution about forecasting income growth in an uncertain economy and as higher rates increase competition for deposits.

Total operating expenses at Goldman rose 11% to $8.1 billion in the quarter. A source told Reuters last week that the bank would lay off 3,000 employees in an attempt to rein in costs.

Goldman Chief Financial Officer Denis Coleman said severance charges will be adjusted in 2023.

The bank reported a profit of $1.19 billion, or $3.32 per share, for the three months ended Dec. 31, missing the Street estimate of $5.48, according to Refinitiv IBES data.

“Widely expected to be awful, Goldman Sachs’ Q4 results were even more miserable than anticipated,” said Octavio Marenzi, CEO of consultancy Opimas.

“The real problem lies in the fact that operating expenses shot up 11% while revenues tumbled. This strongly suggests more cost cutting and layoffs are going to come,” he added.

Goldman’s trading business was a bright spot as it benefited from heightened market volatility, spurred by the Federal Reserve’s quantitative tightening.

Fixed income, currency and commodities trading revenue was up 44% while revenue from equities trading fell 5%.

Overall net revenue was down 16% at $10.6 billion.

Reporting by Niket Nishant and Noor Zainab Hussain in Bengaluru and Saeed Azhar in New York; Additional reporting by Bansari Mayur Kamdar; Editing by Anil D’Silva and Mark Porter

Our Standards: The Thomson Reuters Trust Principles.

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Business

Goldman Sachs Plans to Nudge Out 800 More With Small Bonuses: Report

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  • Sources close to Goldman Sachs told the New York Post more departures are likely on the horizon. 
  • This year’s annual bonuses will be so “skimpy” employees will quit on their own, company insiders alleged.
  • The company laid off 3,200 employees on Wednesday as part of an effort to cut costs.

After cutting more than 3,000 jobs on Wednesday, Goldman Sachs is planning to oust about 800 more employees in a less direct fashion, company insiders say.

Another round of employees is expected to quit in the coming weeks after Goldman Sachs issues annual bonuses, according to sources close to the company who spoke to the New York Post. The forthcoming bonuses are expected to be “so skimpy that disgusted recipients will pack up and leave,” the sources told the Post. 

“The expectation is people will quit the following week,” a source told the Post.

The move would encourage already dejected employees to leave the company without having to be fired by higher ups,  part of an existing Wall Street strategy to nudge out staffers previously referred to as “firing by process,” a term coined by media mogul Barry Diller.

One Goldman employee described morale in the office as “super low” and claimed their co-workers are “very depressed,” according to the New York Post report. The company’s recent layoffs are part of a cost-cutting effort that impacted 3,200 positions in New York, Dallas, Chicago, Salt Lake City, and London. 

Some workers were reportedly asked to attend business meetings during which they were fired and, in some cases, given only 30 minutes to leave, according to the New York Post. 

A Goldman Sachs spokesperson addressed the layoffs in a statement to Insider: “We know this is a difficult time for people leaving the firm. We’re grateful for all our people’s contributions, and we’re providing support to ease their transitions. Our focus now is to appropriately size the firm for the opportunities ahead of us in a challenging macroeconomic environment.”

 

 

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Goldman Sachs Lost $3 Billion on Consumer Lending Push

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Goldman Sachs Group Inc.

GS 1.10%

said a big chunk of its consumer lending business has lost about $3 billion since 2020, revealing for the first time the costly toll of the Wall Street giant’s Main Street push. 

Ahead of fourth-quarter earnings next week, Goldman released financial information that reflects its new reporting structure. The bank in October announced a sweeping reorganization that combined its flagship investment-banking and trading businesses into one unit, while merging asset and wealth management into another.

Marcus, Goldman’s consumer-banking arm, launched in 2016 to a strong start.

Rivals

JPMorgan Chase

& Co. and

Bank of America Corp.

were posting big profits on the back of strong consumer businesses that carried them through rocky stretches in their Wall Street operations. Goldman, long reliant on its gold-plated investment banking and trading arms, wanted in on the action.

The bank rolled out savings accounts, personal loans and credit cards. Its 2019 credit-card partnership with

Apple Inc.

signaled its ambitions to be a big player in the business.

Goldman invested billions of dollars in Marcus. But it struggled to bulk up the credit-card business following an early win with the Apple Card. A long-awaited checking account never materialized.

Economists and financial analysts look at bank earnings to get a sense of the economy’s health. WSJ’s Telis Demos explains how inflation as well as recession concerns can be reflected in their results. Illustration: Lorie Hirose

The consumer unit was never profitable. In October, Goldman formally scaled back its plan to bank the masses.

The reshuffling parceled out the consumer business to different parts of the bank.

Before the shift, it was under the same umbrella as Goldman’s wealth-management division. 

Much of Marcus will be folded into Goldman’s new asset and wealth management unit. Some pieces, including its credit-card partnerships with Apple and

General Motors Co.

, as well as specialty lender GreenSky, are moving into a new unit called Platform Solutions.

Goldman on Friday disclosed that its Platform Solutions unit lost $1.2 billion on a pretax basis in the nine months that ended in September 2022. It lost slightly more than $1 billion in 2021 and $783 million in 2020, after accounting for operating expenses and money set aside to cover possible losses on loans. The unit also includes transaction banking, with services such as enabling banks to send payments to each other, vendors and elsewhere.

Goldman shares closed up about 1% Friday at $374.

The bank said it set aside $942 million during the first nine months of 2022 for credit losses in Platform Solutions, up 35% from full-year 2021. Operating expenses for the division increased 27% during this period. After hovering around record lows for much of the pandemic, consumer delinquencies are rising across the industry.

Net revenue for Platform Solutions’ consumer platforms segment, which reflects credit cards and GreenSky, totaled $743 million during the first nine months of 2022, up 75% from all of 2021 and up 295% from 2020. Goldman completed its acquisition of GreenSky last year. 

The disclosure didn’t reveal financial details for Goldman’s consumer deposit accounts, personal loans and other parts of Marcus. Those business lines are included in the firm’s asset and wealth management division, which is profitable, and aren’t material to the firm’s overall profits, according to people familiar with the matter. 

Goldman is in the process of winding down personal loans, according to people familiar with the matter. It will be ending its checking account pilot for employees, one of the people said, while it considers other ways to offer the product. One possible option is pitching the checking account to workplace and personal-wealth clients.

As recently as the summer, Goldman executives were saying the checking account would unlock new business opportunities for the bank. 

Marcus has been a divisive topic at Goldman. Some partners, senior executives and investors were against continuing to pour billions of dollars into the effort, in particular for checking accounts and other products that Goldman would be developing on its own.

Write to AnnaMaria Andriotis at annamaria.andriotis@wsj.com and Charley Grant at charles.grant@wsj.com

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Business

Goldman job cuts hit investment banking, global markets hard -source

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  • Mass redundancies, spending review beckons for Wall Street giant
  • Cuts to all major divisions expected, globally
  • Restructuring in Asian wealth unit kicks off Wednesday’s layoffs

NEW YORK/LONDON/HONG KONG, Jan 12 (Reuters) – Goldman Sachs (GS.N) began laying off staff on Wednesday in a sweeping cost-cutting drive, with around a third of those affected coming from the investment banking and global markets division, a source familiar with the matter said.

The long-expected jobs cull at the Wall Street titan is expected to represent the biggest contraction in headcount since the financial crisis. It is likely to affect most of the bank’s major divisions, with its investment banking arm facing the deepest cuts, a source told Reuters this month.

Just over 3,000 employees will be let go, the source, who could not be named, said on Monday. A separate source confirmed on Wednesday that cuts had started.

“We know this is a difficult time for people leaving the firm,” a Goldman Sachs statement on Wednesday said.

“We’re grateful for all our people’s contributions, and we’re providing support to ease their transitions. Our focus now is to appropriately size the firm for the opportunities ahead of us in a challenging macroeconomic environment.”

The cuts are part of broader reductions across the banking industry as a possible global recession looms. At least 5,000 people are in the process of being cut from various banks. In addition to the 3,000 from Goldman, Morgan Stanley (MS.N) has cut about 2% of its workforce, or 1,600 people, a source said last month while HSBC (HSBA.L) is shedding at least 200, sources previously said.

Last year was challenging across groups including credit, equities, and investment banking broadly, said Paul Sorbera, president of Wall Street recruitment firm Alliance Consulting. “Many didn’t make budgets.”

“It’s just part of Wall Street,” Sorbera said. “We’re used to seeing layoffs.”

The latest cuts will reduce about 6% of Goldman’s headcount, which stood at 49,100 at the end of the third quarter.

[1/3] A trader works at the Goldman Sachs stall on the floor of the New York Stock Exchange, April 16, 2012. REUTERS/Brendan McDermid/File Photo

The firm’s headcount had added more than 10,000 jobs since the coronavirus pandemic as markets boomed.

The reductions come as U.S. banking giants are forecast to report lower profits this week. Goldman Sachs is expected to report a net profit of $2.16 billion in the fourth-quarter, according to a mean forecast by analysts on Refinitiv Eikon, down 45% from $3.94 billion net profit in the same period a year earlier.

Shares of Goldman Sachs have partially recovered from a 10% fall last year. The stock closed up 1.99% on Wednesday, up around 6% year-to-date.

LAYOFFS AROUND GLOBE

Goldman’s layoffs began in Asia on Wednesday, where Goldman completed cutting back its private wealth management business and let go of 16 private banking staff across its Hong Kong, Singapore and China offices, a source with knowledge of the matter said.

About eight staff were also laid off in Goldman’s research department in Hong Kong, the source added, with layoffs ongoing in the investment banking and other divisions.

At Goldman’s central London hub, rainfall lessened the prospect of staff huddles. Several security personnel actively patrolled the building’s entrance, but few people were entering or leaving the property. A glimpse into the bank’s recreational area just beyond its lobby showed a handful of staffers in deep conversation but few signs of drama. Wine bars and eateries local to the office were also short of post-lunch trade, in stark contrast to large-scale layoffs of the past when unlucky staffers would typically gather to console one another and plan their next career moves.

In New York, employees were seen streaming into headquarters during the morning rush.

Goldman’s redundancy plans will be followed by a broader spending review of corporate travel and expenses, the Financial Times reported on Wednesday, as the U.S. bank counts the costs of a massive slowdown in corporate dealmaking and a slump in capital markets activity since the war in Ukraine.

The company is also cutting its annual bonus payments this year to reflect depressed market conditions, with payouts expected to fall about 40%.

Reporting by Sinead Cruise and Iain Withers in London, Selena Li in Hong Kong, Scott Murdoch in Sydney and Saeed Azhar in New York; Editing by Josie Kao and Christopher Cushing

Our Standards: The Thomson Reuters Trust Principles.

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Goldman To Cut About 3,200 Jobs This Week After Cost Review

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The firm is expected to start the process mid-week.

Goldman Sachs Group Inc. is embarking on one of its biggest round of job cuts ever as it locks in on a plan to eliminate about 3,200 positions this week, with the bank’s leadership going deeper than rivals to shed jobs.

The firm is expected to start the process mid-week and the total number of people affected will not exceed 3,200, according to a person with knowledge of the matter. More than a third of those will likely be from within its core trading and banking units, indicating the broad nature of the cuts. The firm is also poised to unveil financials tied to a new unit that houses its credit card and installment-lending business, which will record more than $2 billion in pretax losses, the people said, asking not to be identified discussing private information.  

A spokesperson for the New York-based company declined to comment. The cuts in its investment bank are elevated by the inclusion of the non front-office roles that were added to divisional headcount in recent years. The bank still has plans to continue hiring, including inducting the regular analyst class later this year. 

Under Chief Executive Officer David Solomon, headcount has jumped 34% since the end of 2018, climbing to more than 49,000 as of Sept. 30, data show. The scale of firings this year is also affected by the firm’s decision to mostly set aside its annual cut of underperformers during the pandemic.

Slowdowns in various business lines, an expensive consumer-banking foray, and an uncertain outlook for markets and the economy are prompting the bank to batten down costs. Merger activity and fees from raising money for companies have taken a hit across Wall Street, and a slump in asset prices has eliminated another source of big gains for Goldman from just a year ago. Those broader industry trends have been compounded by the bank’s mistakes in its retail-banking foray where losses piled up at a much faster rate than forecast through the year.

That’s left the bank facing a 46% drop in profits, on about $48 billion of revenue, according to analyst estimates. Still, that revenue mark has been buoyed by its trading division that will post another jump this year, helping the firmwide figure notch its second-best performance on record. 

The final job reductions figure is significantly lower than earlier proposals in management ranks that could have eliminated nearly 4,000 jobs. 

The last major exercise of this scale came after the collapse of Lehman Brothers in 2008. Goldman had embarked on a plan to cut more than 3,000 jobs, or nearly 10% of its workforce at the time, and top executives elected to forgo their bonuses. 

Sharing the Pain

The latest cuts represent an acknowledgment that even businesses that outperformed this year will have to take the pain as well for a firm-wide performance that’s going to miss targets set for shareholders in a year of expense bleed.

That performance miss was particularly evident in the new unit called Platform Solutions, whose numbers stand out in the divisional breakdown. The more than $2 billion hit there is magnified by lending-loss provisions, exacerbated by new accounting rules that force the firm to set aside more money as loan volumes grow as well as ballooning expenses.

“There are a variety of factors impacting the business landscape, including tightening monetary conditions that are slowing down economic activity,” Solomon told staff at year-end. “For our leadership team, the focus is on preparing the firm to weather these headwinds.”

The cuts also come a week before the bank’s traditional year-end compensation discussions. Even for those who remain at the firm, compensation figures are expected to tumble, especially within investment banking.

It’s a stark contrast from last year, when staffers were getting showered with big bonus increases and a select few were even granted special payouts. At the time, Solomon’s $35 million compensation for 2021 put him alongside Morgan Stanley’s James Gorman as the highest paid CEO for a major U.S. bank.

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Business

Goldman to cut thousands of staff as Wall Street layoffs intensify -source

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NEW YORK, Dec 16 (Reuters) – Goldman Sachs Group Inc (GS.N) is planning to cut thousands of employees to navigate a difficult economic environment, a source familiar with the matter said.

The layoffs are the latest sign that cuts are accelerating across Wall Street as dealmaking dries up. Investment banking revenues have plunged this year amid a slowdown in mergers and share offerings, marking a stark reversal from a blockbuster 2021 when bankers received big pay bumps.

Goldman Sachs had 49,100 employees at the end of the third quarter after adding significant numbers of staff during the pandemic. Its headcount will remain above pre-pandemic levels, the source said. The workforce stood at 38,300 at the end of 2019, according to a filing.

The number of employees that will be affected by the layoffs is still being discussed, and details are expected to be finalized early next year, the source said.

The bank is weighing a sharp cut to the annual bonus pool this year, a separate source familiar with the matter said. That contrasts with increases of 40% to 50% for top-performing investment bankers in 2021, Reuters reported in January, citing people with direct knowledge of the matter.

“GS needs to show that its costs are as variable as its revenues, especially after a year when it provided special rewards to top managers during the boom times,” wrote Mike Mayo, a banking analyst at Wells Fargo.

“Goldman Sachs now needs to show that it can do the same when business is not as good and that they live up to the old Wall St. adage that they ‘eat what they kill,'” he said in a note.

The company’s stock fell 1.3% in afternoon trading alongside shares of JPMorgan & Chase Co (JPM.N) and Morgan Stanley (MS.N), which fell 0.6% and 1.3%, respectively.

Goldman shares have slumped almost 10% this year. But they have outperformed the broader S&P 500 bank index (.SPXBK), which is down 24% year to date.

[1/2] The logo for Goldman Sachs is seen on the trading floor at the New York Stock Exchange (NYSE) in New York City, New York, U.S., November 17, 2021. REUTERS/Andrew Kelly/File Photo

CONSUMER BANK STRUGGLES

The latest plan would include hundreds of employees being cut from Goldman’s consumer business, a source said.

The bank signaled it was scaling back its ambitions for Marcus, the loss-making consumer unit, in October. Goldman also plans to stop originating unsecured consumer loans, a source familiar with the move told Reuters earlier this week, another sign it is stepping back from the business.

Chief Executive Officer David Solomon, who took the helm in 2018, has tried to diversify the company’s operations with Marcus. It was placed under the wealth business in October as part of a management reshuffle that also merged the trading and investment banking units.

Trading and investment banking — the traditional drivers of Goldman’s profit — accounted for nearly 65% of its revenue at the end of the third quarter, compared with 59% in the third quarter of 2018, when Solomon took the top job.

Semafor earlier on Friday reported that Goldman will lay off as many as 4,000 people as the bank struggles to meet profit targets, citing people familiar with the matter.

Goldman Sachs declined to comment.

The latest plans come after Goldman cut about 500 employees in September, after pausing the annual practice for two years during the pandemic, a source familiar with the matter told Reuters at the time.

The investment bank had first warned in July that it might slow hiring and reduce expenses.

Global banks, including Morgan Stanley (MS.N) and Citigroup Inc (C.N), have reduced their workforces in recent months as a dealmaking boom on Wall Street fizzled out due to high interest rates, tensions between the United States and China, the war between Russia and Ukraine, and soaring inflation.

Reporting by Saeed Azhar and Lananh Nguyen; Additional reporting by Noor Zainab Hussain and Mehnaz Yasmin in Bengaluru; Editing by Mark Porter

Our Standards: The Thomson Reuters Trust Principles.

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Business

Exclusive: Goldman Sachs on hunt for bargain crypto firms after FTX fiasco

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LONDON, Dec 6 (Reuters) – Goldman Sachs (GS.N) plans to spend tens of millions of dollars to buy or invest in crypto companies after the collapse of the FTX exchange hit valuations and dampened investor interest.

FTX’s implosion has heightened the need for more trustworthy, regulated cryptocurrency players, and big banks see an opportunity to pick up business, Mathew McDermott, Goldman’s head of digital assets, told Reuters.

Goldman is doing due diligence on a number of different crypto firms, he added, without giving details.

“We do see some really interesting opportunities, priced much more sensibly,” McDermott said in an interview last month.

FTX filed for Chapter 11 bankruptcy protection in the United States on Nov. 11 after its dramatic collapse, sparking fears of contagion and amplifying calls for more crypto regulation.

“It’s definitely set the market back in terms of sentiment, there’s absolutely no doubt of that,” McDermott said. “FTX was a poster child in many parts of the ecosystem. But to reiterate, the underlying technology continues to perform.”

While the amount Goldman may potentially invest is not large for the Wall Street giant, which earned $21.6 billion last year, its willingness to keep investing amid the sector shakeout shows it senses a long term opportunity.

Its CEO David Solomon told CNBC on Nov. 10, as the FTX drama was unfolding, that while he views cryptocurrencies as “highly speculative”, he sees much potential in the underlying technology as its infrastructure becomes more formalized.

Rivals are more sceptical.

“I don’t think it’s a fad or going away, but I can’t put an intrinsic value on it,” Morgan Stanley (MS.N) CEO James Gorman said at the Reuters NEXT conference on Dec. 1.

HSBC (HSBA.L) CEO Noel Quinn, meanwhile, told a banking conference in London last week he has no plans to expand into crypto trading or investing for retail customers.

Goldman has invested in 11 digital asset companies that provide services such as compliance, cryptocurrency data and blockchain management.

McDermott, who competes in triathlons in his spare time, joined Goldman in 2005 and rose to run its digital assets business after serving as head of cross asset financing.

His team has grown to more than 70 people, including a seven-strong crypto options and derivatives trading desk.

Goldman Sachs has also together with MSCI and Coin Metrics launched data service datonomy, aimed at classifying digital assets based on how they are used.

The firm is also building its own private distributed ledger technology, McDermott said.

‘TRUSTED’ PLAYERS

The global cryptocurrency market peaked at $2.9 trillion in late 2021, according to data site CoinMarketCap, but has shed about $2 trillion this year as central banks tightened credit and a string of high-profile corporate failures hit. It last stood at $865 billion on Dec. 5.

The ripple effects from FTX’s collapse have boosted Goldman’s trading volumes, McDermott said, as investors sought to trade with regulated and well capitalized counterparties.

“What’s increased is the number of financial institutions wanting to trade with us,” he said. “I suspect a number of them traded with FTX, but I can’t say that with cast iron certainty.”

Goldman also sees recruitment opportunities as crypto and tech companies shed staff, McDermott said, although the bank is happy with the size of its team for now.

Others also see the crypto meltdown as a chance to build their businesses.

Britannia Financial Group is building its cryptocurrency-related services, its chief executive Mark Bruce told Reuters.

The London-based company aims to serve customers who are eager to diversify into digital currencies, but who have never done so before, Bruce said. It will also cater to investors who are very familiar with the assets, but have become nervous about storing funds at crypto exchanges since FTX’s collapse.

Britannia is applying for more licenses to provide crypto services, such as doing deals for wealthy individuals, he said

“We have seen more client interest since the demise of FTX,” he said. “Customers have lost trust in some of the younger businesses in the sector that purely do crypto, and are looking for more trusted counterparties.”

Reporting by Iain Withers and Lawrence White, Editing by Lananh Nguyen and Alexander Smith

Our Standards: The Thomson Reuters Trust Principles.

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Business

Goldman Sachs pulls back from retail banking in latest overhaul

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Goldman Sachs said it was pulling back from its highly touted foray into retail banking to focus more on its traditional strengths serving big corporations and wealthy investors as part of a major reorganisation under chief executive David Solomon.

Solomon said the Wall Street powerhouse was trying to align its online retail bank operations with its wealth management business, adding that was “a better place for us to be focused than to be out massively looking for consumers”.

“The concept of really being broad with a consumer footprint is not really playing to our strengths,” he told CNBC. “But when you look at our wealth platform . . . the ability to add banking services to that and align it with that actually plays to our strength.”

Goldman announced its restructuring as it reported third-quarter net income of $3.1bn, or $8.25 a share, down 43 per cent from $5.4bn, or $14.93 a share, a year ago. That beat analysts’ estimates for $2.9bn, or $7.75 a share, according to consensus data compiled by Bloomberg, but was still the group’s fourth straight quarterly decline.

“The scaling back of consumer makes sense,” said Christian Bolu, banking analyst at Autonomous Research. “It’s a case of really focusing on existing clients, which probably are very high value, high net worth . . . rather than spending the money to go chase new clients.”

Under the revamp, Goldman will fold its trading and investment banking business into one unit as it shrinks from four divisions to three. The plan was announced as the Wall Street bank deals with a prolonged slowdown in investment banking fees.

“These organisational changes represent an important and purposeful evolution in our strategic journey, positioning us well to deliver for our clients and unlock shareholder value,” Solomon said in a memo to employees that was seen by the Financial Times.

The move reflects the reality that Solomon has yet to convince investors that Goldman has changed substantially from the investment banking and trading-driven house that he inherited four years ago, and merits a superior stock market multiple.

The reorganisation, the bank’s second in less than three years, will break Goldman’s consumer business into two separate areas, reducing the prominence of its push into consumer banking through online retail lender Marcus. Since its launch in 2016, Marcus has come under scrutiny from investors and internally following years of losses and escalating costs.

The three divisions will be: a merged investment bank and trading unit; an asset and wealth management division that will house Marcus; and the newly formed Platform Solutions business comprising the rest of Goldman’s retail banking operations, such as its Apple credit card partnership and online lender GreenSky, as well as the fledgling transaction banking business.

Goldman shares was up more than 2 per cent in midday trading in New York.

In the third quarter, the group’s net revenues totalled $11.98bn, down from $13.6bn a year earlier but ahead of analysts’ forecasts for $11.4bn. Revenues from its trading division, which has benefited from heavy activity during the recent market volatility, came in ahead of analysts’ estimates.

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Business

Goldman plans major reorganization to combine key units -source

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LONDON/NEW YORK, Oct 16 (Reuters) – Goldman Sachs (GS.N) is planning a major reorganization to combine its biggest businesses into three divisions with its investment banking and trading businesses being merged into a single unit, a source familiar with the matter told Reuters.

The plans are expected to be announced on Oct. 18 alongside Goldman’s third quarter earnings. Marcus, Goldman’s consumer banking business, will be absorbed into the wealth unit, the source said, confirming an earlier Wall Street Journal report.

A spokesperson for Goldman Sachs declined to comment.

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This is the biggest shakeup since the company’s investor day in early 2020 when it outlined plans for four core units: investment banking, global markets, consumer and wealth management and asset management.

“It’s a head scratcher,” said Mike Mayo, a banking analyst at Wells Fargo. “Right now, there are more questions than answers for Goldman Sachs as it relates to this potential restructuring.”

The move comes as the Wall Street titan seeks to boost its income from fee-based businesses and cut its reliance on volatile trading and investment banking revenues. The changes also signal Marcus, the consumer unit, is being relegated after Chief Executive Officer David Solomon expressed big ambitions to build a mainstream digital bank.

“This may be a way to put Marcus to the back burner as a way to de-emphasize its importance as an investment opportunity,” Mayo said.

Solomon, who became CEO in 2018, has sought to expand Goldman’s footprint in retail banking since his early days at the helm.

But the consumer banking unit that launched in 2016 has struggled to gain traction and suffered from delays. Marcus has yet to launch a checking account that was scheduled for this year. At mid-year, the bank internally forecast that Marcus’ losses would accelerate to more than $1.2 billion in 2022, for cumulative losses of more than $4 billion, Bloomberg reported. Goldman declined to comment on the loss.

Solomon has said the business could generate revenue of over $4 billion by end of 2024.

Net revenue in the consumer-banking unit grew by 23% to $1.49 billion in 2021, reflecting higher credit card and deposit balances, the bank said in its annual report.

Marcus offers digital banking products such as loans, savings and certificate of deposits. It also provides credit cards via a partnership with Apple Inc (AAPL.O).

The consumer business serves more than 14 million customers and had more than $100 billion in deposits with over $16 billion in cards and loans balances, the bank has said.

GOLDMAN SACHS’ OVERHAUL KEEPS MANAGEMENT “ON ITS TOES”

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, and Ashok Varadhan, now co-head of its global markets division, according to Bloomberg.

Marc Nachmann, the bank’s global co-head of the global markets division, will move to help run the combined asset- and wealth-management arm, the report said.

Marcus will become a part of the asset and wealth management unit, the report added.

“This is a way for Goldman Sachs to keep its management team on its toes and to reinforce the intensity that defines Goldman,” Mayo said.

Such an organizational overhaul of the bank comes shortly after its global job cuts in September that could have impacted hundreds of bankers.

In the second quarter, Goldman reported a 48% slump in profit that beat forecasts as fixed-income and commodities trading surged.

Like its Wall Street rivals, the bank is expected to report a sharp drop in third-quarter net profit as investment banking revenue was badly hurt by a slump in dealmaking.

Goldman is expected to deliver a net profit of $2.77 billion in the third quarter, according to analysts’ forecasts compiled by Refinitiv, down from $5.38 billion a year earlier.

Given the tough operating environment, Goldman is closely re-examining all of its forward spending and investment plans to ensure the best use of its resources, Barclays said in a recent report.

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Reporting by Pamela Barbaglia in London, Lavanya Ahire and Akriti Sharma in Bengaluru, Selena Li in Hong Kong, Saeed Azhar in New York; Editing by Sherry Jacob-Phillips and Muralikumar Anantharaman

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