Observers question the merits of the expected move, but say it could simplify the historic Wall Street firm. Experts are also perplexed about the future of Marcus, Goldman’s digital consumer bank, whose CEO David Solomon had big ambitions in order to tap street customers.
“They definitely created with Marcus…but the truth is: What is the cost of the money they bring in?” said Chris Marinac, director of research at Janie Montgomery Scott.
Goldman had to invest heavily to grow Marcus’ business and was offering savers a much higher rate of return than his retail competitors to put their money into.
Two people familiar with the matter told Reuters that the group’s reorganization would merge its investment and commercial banking businesses into a single unit. Sources said Marcus will be absorbed into the bank’s asset and wealth management unit, confirming an earlier report by the Wall Street Journal.
The plans are expected to be announced on Tuesday alongside Goldman’s third-quarter results, which are expected to show a sharp drop in net profit due to a slowdown in trading.
It’s the company’s biggest change since the company’s Investor Day in early 2020, when it outlined plans for four main units: Investment Banking, Global Markets, Consumer & Wealth and Asset Management.
A Goldman Sachs spokesman declined to comment.
This adjustment comes as the Wall Street giant seeks to increase its income from fee-based activities.
“This could be a way to push Marcus into the background to under-emphasize its importance as an investment opportunity,” said Mike Mayo, banking analyst at Wells Fargo.
Marinac of Janie Montgomery Scott said Goldman is refocusing on its core business.
“They’re great at trading, great at investment banking,” said Marinac. “And while these companies aren’t necessarily the best this quarter, it’s still a good business. In the long run, it’s a winner, so you can’t beat it at all.”
However, some observers said the logic behind the expected changes remains unclear.
Since becoming CEO in 2018, Soliman has sought to expand Goldman’s footprint in retail banking.
But the retail banking unit launched in 2016 has struggled to gain traction and has suffered from delays. Marcus has yet to launch a checking account that was planned for this year.
Internally, the bank expected Marcus’ losses to accelerate to more than $1.2 billion in 2022, for a cumulative loss of more than $4 billion, according to Bloomberg. Goldman declined to comment on the loss.
Solomon said the company could generate more than $4 billion in revenue by the end of 2024, while posting a net income of $1.49 billion in 2021. The unit had $100 billion in deposits and serves 14 million customers.
Marcus offers digital banking products such as loans, savings and certificates of deposit. It also provides credit cards through a partnership with Apple Inc.
The combined investment and commercial banking group will be overseen by Dan Dess and Jim Esposito, who are currently global co-heads of Goldman’s investment banking division, and Ashok Varadan, currently co-head of the investment banking division. global markets, according to Bloomberg.
According to the report, Mark Nachman, current global co-chair of Global Markets, will move to help lead the joint asset and wealth management arm.
The adjustment follows a series of global job cuts in September that could have affected hundreds of bankers.
“It’s a way for Goldman Sachs to keep its management team on alert and build the strength that defines Goldman,” Mayo said.