Goldman Sachs withdraws from retail banking in latest revision

Goldman Sachs said it is withdrawing from its much-launched entry into retail banking to focus more on its traditional strengths that serve large corporations and wealthy investors as part of a major restructuring under CEO David Solomon.

Solomon added that the Wall Street powerhouse is trying to align its online retail bank operations with its wealth management business, adding that this is a “better place for us to focus rather than collectively seek out consumers.”

“The concept of being really large with a consumer footprint doesn’t really play to our strengths,” he told CNBC. “But when you look at our wealth platform . . . the ability to add banking services to it and align with it actually adds to our strength.”

Goldman announced a restructuring as it reported third-quarter net income of $3.1 billion, or $8.25 per share, down 43 percent from $5.4 billion, or $14.93 per share, a year ago. That beat analysts’ estimates of $2.9 billion, or $7.75 per share, according to consensus data compiled by Bloomberg, but it was still Goldman’s fourth-quarter decline in a row.

As part of the renewal, Goldman will consolidate its commercial and investment banking business into a single unit while shrinking from four divisions to three. The plan was unveiled as the Wall Street bank grappled with a prolonged slowdown in investment banking fees.

“These organizational changes represent an important and purposeful evolution in our strategic journey, positioning us well to deliver our customers and unlock shareholder value,” Solomon said in a note to employees by the Financial Times.

The move reflects the fact that Solomon has yet to convince investors that Goldman has changed significantly from the investment banking and trading-focused home it took over four years ago and deserves a superior stock market coefficient.

The bank’s second restructuring in less than three years will divide Goldman’s consumer business into two separate areas, reducing the importance of its transition to consumer banking through the online retail lender Marcus. Since its launch in 2016, Marcus has come under scrutiny from investors and internally after years of losses and rising costs.

The three divisions will be: a combined investment bank and trading unit; an asset and asset management section to house Marcus; and the newly formed Platform Solutions business, which includes the remainder of Goldman’s retail banking operations such as the Apple credit card partnership and online lender GreenSky, as well as the startup transaction banking business.

Goldman’s stock rose more than 4 percent in morning trading in New York.

In the third quarter, Goldman’s net income fell to $11.98 billion from $13.6 billion a year earlier, but ahead of analysts’ estimates of $11.4 billion. Revenues from the trading segment, which benefited from intense activity during the recent market volatility, beat analysts’ estimates.

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