Goldman plans new key changes, combines trading and investment banking

Goldman’s consumer banking section, Marcus, named after its founder, will be part of the firm’s asset and wealth management section

Goldman Sachs Group Inc. undertakes major reorganization as the investment banking firm plans to combine its biggest business into three divisions. This rearrangement blends the firm’s investment banking and trading businesses into one unit and integrates asset and wealth management into another unit.

The third division will see the forming of transaction banking which comprises the investment firm’s financial technology platforms, GreenSky, its specialty lender, and its ventures with General Motors co and Apple Inc. Goldman’s consumer banking section, Marcus, named after its founder, will be part of the firm’s asset and wealth management section. Goldman Sachs is scheduled to announce its third-quarter earnings Tuesday and the reshuffling could be announced within days.

The rearrangement could bring forward shifts in the positions of a few executives by assigning new roles. Marc Nachmann, co-head of trading will move up to help operate the combined asset wealth management section.

The reshuffling is a part of the firm’s efforts to move toward businesses that generate stable income by cutting its dependence on fickle trading and investment banking revenues in accordance with the steps taken by Chief Executive David Solomon. The firm’s trading and investment banking have been the firm’s profit-flowing sector, giving massive revenues when markets bolstered risk takers.

The merged banking and trading business would make Goldman Sachs’s organizational chart similar to its contenders. The merged group had a return on equity of 9.2% in 2019, surpassing Bank of America Corp. and Morgan Stanley but below Citigroup Inc and JPMorgan Chase, reports the Wall Street Journal.

Goldman Sachs had difficulties keeping pace with its contemporary firm and it pursued to reduce the gap by combining businesses that provide higher valuations on Wall Street which includes administering funds for pensions and managing wealthy mass money, which is more predictable, and profitable. These profitable methods do not put the firm’s balance sheet at any risk.

The bank is expected to report a strong drop in third-quarter net profit as investment banking revenue was hit badly by a slump in deal making.

Chief Executive David Solomon expected to take turns in retail banking since his early days as the company’s head. However, the company’s consumer banking unit, which was launched in the year 2016, is struggling to gain footing and will be taken into asset and wealth management.

Marcus has suffered from some delays; the consumer arm of the firm is yet to launch a checking account which it earlier indicated will be launched this year. At mid-year, the bank internally forecast that the unit’s losses would accelerate to more than $1 billion in 2022, which means meaning cumulative losses will exceed $3 billion.

Solomon has said in the past the business could generate a revenue of over $3 billion by end of 2024. Goldman Sachs banking’s net revenues grew by 23% to $59.34 billion in 2021, reflecting deposit balances and higher credit card.

The digital banking platform Marcus offered products such as savings, loans, and certificates of deposits, and along with its partnership with Apple also offered credit cards. The consumer business serves more than 14 million customers and had more than $95 billion in deposits with over $16 billion in cards and loan balances, the bank has said.