David Solomon's first few months as Chief Executive of Goldman Sachs have long been rhetoric, promising to take the digital disruption to the next level and rigorously review the company's existing business while simultaneously embarking on a new era Introduced transparency and introduced a new era Millennial-friendly dress code "Casual Everyday".
Yet, despite discussions about securing the future of one of Wall Street's most venerable institutions, the bank's quarterly update on Monday failed to encourage investors to look for signs of Goldman's strategic rebirth. Its shares fell nearly 4 percent, down 1
"So far, there has been sound and anger. , , But little in terms of evidence (or progress) or recognition from investors, "said Wells Fargo analyst Mike Mayo, saying Goldman's book value price of about $ 0.95 was" one of the lowest ratings without any crises in history. "
Barclays bank analyst Jason Goldberg said that since the acquisition of Mr. Solomon "there has definitely been progress" but "much more work can be done".
Here is the job of Mr. Solomon list:
The master plan to bring Goldman into the next era was the biggest conversation among investors and analysts since Lloyd Blankfeins 12-year tenure as last CEO ended year. Mr. Solomon and his team promised a "front to back" review to assess resource allocation and priorities across the enterprise. An update was originally promised in spring 2019. On Monday, Goldman said the "comprehensive update" would come in the first quarter of 2020 and promised incremental progress reports. Many analysts were not satisfied.
"Ultimately, we need to see his strategic plan and he needs to implement it before we can really judge it," said Christian Bolu, bank analyst at Autonomous, who believes Mr. Solomon is "doing the right things." try to shift the business from slow growing old companies to faster growing ones.
Restructuring of Fixed Income Securities
Trading in fixed income securities was the problem child at Goldman when Mr. Solomon took office. The bank had the worst commodity year of 2017, and income in the Fixed Income, Currency and Commodities division – known as FICC – was between 2016 and 22 percent lower than in 2018, leading to criticism that Goldman was not secular in recent years.
Goldman's FICC performance has improved over the last two quarters relative to other Wall Street banks, partly due to the Bank's low base. While Mr. Solomon and his team have promised to transform the FICC for today's opportunity and not for the booming years of the past, concrete information on how to do so was scarce.
In the earnings announcement on Monday, executives said technology should be used throughout the FICC business, that resources were being reduced to below-average performance, and investments were being made in more promising ones. "It's still not clear," Mayo said, adding that while Goldman "rattled" about a dozen areas of potential growth, he still did not know what they were up to.
Mass Market Revolution
Just as former Trade Manager, Mr. Blankfein, portrayed Goldman's face in the heyday of FICC, Mr. Solomon – an amateur disc jockey – became the personification of the future in the mass market Bank. Apple's recent announcement of Goldman at Apple is a step in this direction, although the financial implications of the merger are unclear. Mr. Solomon also plans to expand Marcman, the pure online bank of Goldman, and to engage in more detailed monetary management for wealthy Americans.
In investment banking, Mr. Solomon accelerated Goldman's efforts to support smaller corporate customers and announced Monday plans for a team of 100 investment bankers targeting companies valued at less than $ 2 billion. Concentrate dollars. Under Mr. Solomon, Goldman is also pushing into the cash management business, a disreputable business dominated by major commercial banks such as Citigroup, HSBC and JPMorgan Chase.
Investment Banking recovers
Investment banking – and in particular the advisory end of the company in which Mr. Solomon has built his career – has been a bright spot since its founding. In the first quarter, Goldman increased its consulting revenues by 51 percent to $ 900 million. This is far better than the 12 percent increase in consulting fees in the JPMorgan competition over the same period. Goldman also stormed ahead of JPMorgan to claim first place in M & A and equity capital markets this year.
The Legacy of 1MDB
The fallout from Malaysia's 1MDB money laundering and bribery scandal has severely undermined Mr. Solomon's first few months. The US Department of Justice is investigating the bank, and Malaysia is suing it for $ 7.5 billion for Goldman's role in helping the defunct state-owned investment fund raise $ 6.5 billion, of which billions were plundered. Mr. Solomon said on Monday, "Nobody wants a solution faster than we do," but the bank did not know when the situation would be resolved.
Goldman announced in February that three million executives, including Mr. Blankfein, had withheld millions of dollars in "more information" about "ongoing regulatory and regulatory investigations" in 1MDB -Scandal. Goldman provided $ 516 million for litigation and regulatory matters in the fourth quarter of 2018, most of which relates to 1MDB.