Goldman Sachs enacts restructuring effort to streamline productivity


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Jared Maloney

Goldman Sachs Group Inc. announced last week that it will undergo organizational restructuring following the end of its third quarter.

The financial institution will merge its investment banking and trading units into one division, as well as combine its asset and wealth management units. Goldman Sachs will also create a new division made up entirely of digital assets.

The changes are meant to keep the company aligned with its goals, as declared in its third quarter report.

Goldman Sachs aims to streamline its services to make it more accessible and appealing to clients. It also wants to combat a significant projected loss of business caused by digital banking and trading product units, which have cut out traditional financial middlemen.

“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,” Goldman Sachs CEO David Solomon said.

This references an earlier streamlining initiative that began in 2020 to create a “client-centric organizational structure.”

Solomon said these mergers would help Goldman Sachs achieve three goals. These include increasing management fees, competing more effectively with its rivals and expanding its digital platform to serve a larger and more complex clientele.

This restructuring also saw the folding of its Marcus subsidiary into the combined asset and wealth asset division. Founded in 2016, Marcus was an attempt to break into the consumer banking industry and compete with large retail banks like JPMorgan Chase & Co. and Bank of America Corp.

Some consumer services that were offered under Marcus — such as a credit card partnership with Apple Inc. and The General Motors Co. — will be offered in a separate business line, also known as platform partnerships.

These mergers have resulted in few changes in Goldman Sachs’ leadership. Ashok Varadhan, the head of trading, Dan Dees and Jim Esposito — both co-heads of investment banking — will manage the merged division together. Stephanie Cohen, the only woman in a leadership role in the merged asset and wealth asset divisions, will head the new platform solution unit. The four will maintain all of their previous responsibilities.

Goldman Sachs’ third quarter earnings report beat the expectations of market observers. The company earned $3 billion in profit this quarter. Although it is slightly better than last quarter, it is 43% less than the amount the company earned in the same period last year.

Given market conditions, this decline in profit from last year was expected, but its returns were still higher than predicted this quarter.

JPMorgan and the Bank of America saw a smaller decline in profits this quarter, relative to Goldman Sachs. This is due largely to their ability to capitalize more effectively on consumer spending and increased interest rates.

Last year, however, Goldman Sachs outperformed its competitors, so its profits had further to fall.

“There’s no question that the aspirations probably got, and were communicated in a way that were broader than where we’re now choosing to go,” Solomon said in an earnings call, as reported by CNBC. “We are making it clear that we’re pulling back on some of that now.”