Goldman Sachs Restructures Its Divisions, Elevating Tech Offerings as Profit Falls - The New York Times

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The bank will combine trading and investment banking into one unit; asset management, wealth management and consumer businesses into another; and its digital offerings in a third.

Goldman Sachs is taking another step away from its past as a clubby Wall Street partnership, adopting a new three-pronged structure that combines investment banking and trading into one unit; merges asset and wealth management into another; and elevates its digital offerings into a third unit, the bank announced on Tuesday.

The move is the latest in a mission that David Solomon, the bank’s chief executive, has been blunt about: remaking Goldman’s culture and practices into something more streamlined and better oriented toward a future in which technology is likely to sap big banks’ ability to make money as intermediaries.

“Today, we enter the next phase of our growth, introducing a realignment of our businesses that will enable us to further capitalize on the predominant operating model of One Goldman Sachs as we better serve our clients,” Mr. Solomon said in a news release accompanying the bank’s latest earnings report, referring to an internal initiative that began in 2020 to create a “client-centric organizational structure.”

In a call to discuss the company’s earnings with Wall Street analysts, Mr. Solomon said the restructuring would help Goldman achieve three goals: increasing management fees, enlarging the share of Wall Street business it captures from rivals and expanding its digital platform offerings to serve the largest clients with the most complex needs.

In addition to a combined trading and investment banking unit that more closely resembles those at rivals like JPMorgan Chase and Morgan Stanley, Goldman will form a division that merges its asset and wealth management businesses. The bank’s consumer banking business, which debuted under the name Marcus several years ago, will be folded into that unit, and the bank will shift focus to marketing those consumer services to employees of large companies that are already Goldman clients.

But other elements of Goldman’s consumer offerings, including its credit card partnerships with Apple and General Motors that came under Marcus, will now be managed in a different business line called platform solutions. This unit will also house the cloud-based services that the bank offers to large companies, including ways to manage cash and send payments quickly around the world.

Tuesday’s changes also seek to correct Marcus’s wobbly course. Though it has been a reliable trading powerhouse for decades, Goldman has struggled to keep up with peers’ moves in attracting new money from wealthy individual clients, and Marcus has not won the customer base that its creators expected when it was opened in 2016.

Mr. Solomon explained to analysts that targeting client companies’ employees as customers would significantly reduce the cost of attracting new users. He admitted that the reorganization represented a retreat, in part, from the bank’s apparent earlier goal of building a widely used consumer service that could compete with other large retail banks.

“We’re pulling back on some of that,” he said.

The people in charge of the new business units will largely remain the same. Ashok Varadhan, who led Goldman’s trading business, and Dan Dees and Jim Esposito, its co-heads of investment banking, will lead the combined unit together. The erstwhile leaders of asset management and wealth management will assume various responsibilities atop their newly merged unit. Stephanie Cohen, once in charge of the consumer and wealth management businesses and the lone woman among the leaders in the newly announced structures, will be the global head of the bank’s platform solutions unit.

Goldman’s announcement accompanied its third-quarter earnings report, which beat analysts’ expectations. The bank earned just over $3 billion in profit in the quarter, 43 percent less than in the same period last year but 5 percent more than in the previous quarter. The bank’s shares rose more than 2 percent on Tuesday.

Goldman recently resumed the practice of regularly laying off underperforming employees, which was paused during the earlier stages of the pandemic, and is preparing to cut 1 to 5 percent of workers based on annual performance reviews. The bank said its head count overall grew 14 percent over the past year.

It was the last of the big six banks to report third-quarter earnings, and its profits fell more steeply, percentagewise, than those of rivals with bigger retail businesses, like JPMorgan and Bank of America, which were cushioned by consumer spending and the effects of higher interest rates on their loan books. But Goldman’s leaders emphasized that, a year ago, the Wall Street giant had far out-earned its largest competitors. In other words, its profits had further to fall.

Mr. Solomon warned analysts on Tuesday that the short-term economic outlook would “remain unsettled,” and that many businesses appeared to be holding off on big decisions until they could make better guesses about what the future held.

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