Goldman Sachs CEO Admits Mistakes: ‘There Were Clear Failures’

David Solomon

Its foray into retail banking has cost Goldman billions.

(Photo: IMAGO/NurPhoto)

new York David Solomon struggles to find the right balance. The CEO of Goldman Sachs emphasized his bank’s recent successes at Investor Day on Tuesday. But he also has to address the problems of the institute, which has become accustomed to success. “There were clear successes, but also some clear failures,” he admitted.

It’s only the second investor day in the Wall Street Institute’s 154-year history, and Solomon knows the new strategy has to work. The CEO, who has been in office since 2018, is stricken and has been sharply criticized for the recent mistakes for months.

On Tuesday, the Goldman boss put the Asset and Wealth Management division, or AWS for short, in the focus of investors. In the future, it will be the “central growth driver” – and should above all ensure that Goldman becomes less dependent on the volatile trading and investment banking business.

Achieving more stable earnings has long been a goal of the bank. Solomon failed at the first attempt. A broad-based push into retail banking was originally intended to reduce reliance on investment banking. But despite investments worth billions, the desired successes did not materialize.

>> Read here: Goldman cut CEO Solomon’s salary by 30 percent

Solomon announced last year that he would scale back the ambitions surrounding the online bank Marcus. “We wanted too much and too fast,” he said on Tuesday. Marcus hasn’t been lending for months, only accepting deposits that carry relatively high interest rates.

The bank is looking for “strategic alternatives” for parts of its retail banking business, which includes credit cards and specialty lender GreenSky, Solomon said. However, he left details open. According to financial sources, the bank is considering finding a buyer for the loans that are still on the books.

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Solomon meets investors from a position of weakness: the bank only had to report unusually poor quarterly results in January. Profits collapsed by two-thirds. The return on tangible equity, an important measure of profitability, was 11 percent for the year, well below the announced target of 15 to 17 percent. Bonuses were cut by 50 percent and Solomon cut more than 3,000 jobs in the biggest wave of layoffs since the 2008 financial crisis.

Solomon has had his fair share of acknowledgments over the past few months — not often at a bank that’s considered the leading house on Wall Street and prides itself on attracting the best talent in finance.

“And it’s not well received internally either,” complains a former employee. “The mood is miserable.” A cover story in the British magazine “Economist” in January then sent the morale of the Goldman bankers to a new low. “Goldman Sags” was the headline, which in the play on words means “Goldman Sags”.

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Analysts are also worried about the bad mood – and what effects this could have on business. Wells Fargo banking analyst Mike Mayo urged the board to address the issue — again, that’s very rare on Wall Street.

After all: The core business is strong, emphasized Solomon. Goldman continues to be the leading bank in M&A advisory, gaining market share both here and in the bond trading business. Goldman stock is up 6.5 percent this year, well ahead of the broader S&P 500, which rose 3.7 percent.

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