Goldman Sachs to Merge Trading Business, Other Units to Boost Revenue

Goldman Sachs, a top American multinational investment bank, is making plans to emerge its key business units into three divisions.

The world’s second-largest investment bank will combine its trading and investment banking operations into one, Reuters reports.

In addition, the financial services firm will absorb its consumer banking business, Marcus, into a combined asset and wealth management unit.

The third division of the mergers is expected to comprise Goldman Sachs’ transaction banking business and GreenSky, its recently-acquired lending technology platform, among others.

The goal of the realignment is to help the American investment banking giant reduce its dependence on volatile revenues from its trading and investment banking businesses, the outlet said.

Bloomberg reports that the merged trading and investment banking division will be run by Dan Dees, Jim Esposito and Ashok Varadhan.

While Dees and Esposito are Goldman Sachs’ Global Co-Heads of Investment Banking, Varadhan is the Co-Head of its Global Markets Division.

On the contrary, Marc Nachmann, the other Co-Head of the Global Markets Division, is expected to be put in charge of running the combined asset and wealth-management arm.

Revenue Dip

During the first quarter of 2021, Goldman Sachs reported $17.7 billion in net revenue, smashing all forecasts at the time. However, by the first quarter of 2022, the net revenue slumped 27% to $12.93 billion.

Furthermore, during the second quarter of this year, Goldman Sachs reported a 48% drop in profit, even as its revenue from investment banking collapsed 41% to $2.14 billion.

The drop in the financial services firm’s fees from equity and debt underwriting as well as stock listings, mergers and acquisitions as well as advisory services contributed to the slump.

In addition, competitors JP Morgan Chase & Co, and Morgan Stanley reported a downslide in their revenues from investment banking.

In July, Denis Coleman, Goldman Sachs’ Chief Financial Officer, warned that the financial services firm may slow down on hiring and cut down its expenses.

Meanwhile, analysts expect Goldman Sachs’ net profit for Q3 2022 to nosedive 49% to $2.77 billion from $5.38 billion in the same period in 2021. The third quarter figures are expected to be released on Tuesday.

Analysts believe that the slowdown in dealmaking as a result of global inflation and interest rate hikes will hurt the company’s revenue.

Earlier in the year, David Solomon, Goldman Sachs’ Chief Executive Officer, during an earnings call ascribed the current “complicated” market environment to macroeconomic and geopolitical events such as the Russia-Ukraine war.