Solomon’s second year will be a test of whether he can address those — and give shareholders a new reason to get excited.
He declined to be interviewed for this story.
Analysts estimate he reached the first-year mark with revenue down 1.7 per cent from the previous 12 months. The stock has slipped almost 8 per cent, making it the worst performer among the five biggest US banks. Goldman Sachs is now the only big US bank trading below tangible book value — what the company estimates its pieces would fetch in liquidation.
Even a year into the job, personnel upheaval remains a constant topic with long-tenured executives departing and thinning the partnership, a throwback to the firm’s days before becoming a publicly traded company.
Solomon is irked by the perception of a feuding family. He’s argued privately it’s no different from when Lloyd Blankfein was installed as the leader more than a decade ago, according to colleagues.
“Two Hundred West has been compared to Game of Thrones for as long as I can remember,” said Brennan Hawken, an analyst at UBS, referring to Goldman’s headquarters. “Successful investment-banking franchises are not warm and fuzzy places. But the magnitude of the turnover has been more than I expected.”
Solomon has a very different style to former chief Lloyd Blankfein.Credit:Bloomberg
Two senior decision-makers at the firm said it’s less a drama, and more an exercise in pragmatism. Some deadwood needed to be cleared, one said.
In July, the firm’s president, John Waldron, hosted a dinner for a select group of clients. A lot of the conversation was spent describing how old management was slow to make changes, according to one prominent investor in the room, who asked not to be identified discussing the private event. Goldman’s new team guaranteed they’re rolling out fixes.
Solomon is expected to unveil a fresh multi-year strategy to investors early next year.
“There’s a bigger transformation occurring at Goldman Sachs today than any other large financial firm,” said Devin Ryan, an analyst with JMP Securities. “We have to be patient.”
Solomon cuts a contrasting figure to Blankfein, who came to be known for his backslapping and wry humour while running the firm. The successor has developed a reputation for a more clinical and exacting style. One former colleague recalled how Solomon in his early years would jokingly repeat a line made famous by Gordon Gekko: “If you need a friend, get a dog.”
Successful investment-banking franchises are not warm and fuzzy places. But the magnitude of the turnover has been more than I expected.
UBS analyst Brennan Hawken
The CEO is also pushing for more transparency and frequent communication with his 36,000-strong workforce. He’s toyed with the idea of disbanding the offices of the firm’s senior management from their 41st-floor perch in Manhattan and have them sit closer to the nerve center of the various business lines.
Solomon didn’t get the honeymoon period that some new CEOs enjoy.
Within weeks of his ascent, the firm’s controversial dealings with Malaysia’s 1MDB investment fund spiraled into a much larger scandal as the Department of Justice unveiled indictments alleging employees at Goldman were more deeply involved than previously known.
That immediately caused the stock to break from its peers, a divergence that’s held. The bank has been trying to resolve what’s become one of its ugliest scandals in a generation, but US authorities and the Malaysian government hold more sway over the timing of any settlement. Meantime, the delay only serves to unnerve observers and ratchet up public scrutiny of the clients Goldman takes in, as well as the work it does for them.
Solomon has been preaching the ideal of client primacy. He wants big investors and corporations to trust Goldman enough to use it as a one-stop shop. To emphasize that shift, he’s given important roles to some of the firm’s top investment bankers across divisions.
That’s a strategy that has doubters among the firm’s illustrious alumni. Two former members of the C-suite privately vent that disbursing investment bankers to other jobs won’t help grow businesses.
Solomon has embraced the consumer-banking push initiated by Blankfein, and how that effort develops will probably help define his legacy. It goes to the heart of his goal to create a more diversified firm that can count on more than just trading and dealmaking for the bulk of its revenue.
The foray into new areas of banking has been sucking up a lot of cash — more than $1 billion so far, according to the latest earnings call. Solomon has said the division will grow to become one of the firm’s pillars but needs to be given a longer runway. It already has millions of customers and recently launched a flashy titanium credit card in a partnership with Apple.
In other areas, he’s collated the firm’s disparate investing efforts in one place to give the business more clarity. He’s also seeking to turbo-charge asset and wealth management with acquisitions and product lines.
Despite the many moving pieces, he’s been finding a little weekend downtime. Solomon spent some of it bingeing on Sons of Anarchy – a show about an outlaw biking club searching for a fresh identity.
Bloomberg
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