For only the second time in Goldman Sachs’ 154-year history, investors will gather on Tuesday to ponder the future of a Wall Street giant that seems to have lost its way. The bank whose dominance was once so assured it gained notoriety as the “Vampire Squid” is now more of a damp squib. A nosedive in profits in the last quarter of 2022, punishing job cuts denting morale, and a botched strategic overhaul have left Goldman trailing its arch-rival, Morgan Stanley. The Investor Day presents a rare opportunity for shareholders to press the chief executive, David Solomon, on how Goldman can regain its status as top dog. They ought not to demur.
Solomon can point to higher profits and a larger market share in Goldman’s core businesses of investment banking and trading since he became CEO in 2018. But investors do not value those businesses as highly as they once did because the profits they generate are more unpredictable and undercut by capital demands. Morgan Stanley has pulled ahead of Goldman largely because after the financial crisis, it diversified into asset and wealth management, which generate more stable returns.
Goldman remains more reliant on dealmaking and trading, hence investors value it less. Efforts to change its business mix have been lacklustre. A foray into consumer banking and technology was ill conceived. That is not all to be laid at Solomon’s door; his predecessor, Lloyd Blankfein, started the push into retail banking. But Solomon doubled down and Goldman has lost more than $3bn since 2020 on its consumer and fintech venture.