Goldman Sachs CEO David Solomon addresses the failure of the company’s retail-banking efforts, the Marcus project, during an investor-day meeting earlier this week.
- During the meeting, Solomon addressed concerns that the financial institution was struggling, saying, “our franchise is strong.”
- Goldman’s project, Marcus, was initially planned as a way to compete with institutions like JPMorgan Chase. However, the project failed as it could not survive an uncertain economy and higher interest rates.
- “It was clear we lacked certain competitive advantage, and we did too much too quickly, which affected our execution,” Solomon says.
- Solomon adds that Goldman has learned from the experience.
- “Success is not a given. Sometimes we fall short, sometimes we don’t execute, but we always learn and adapt,” Solomon says.
Why it’s news
Last year did not end well for investment banking giant Goldman as it reported profits down 69% in the final quarter. At the same time, deal-making revenue declined as the broader economy looked grimmer.
The disappointing reports resulted in a staff reduction of nearly 3,200 positions—around 6% of Goldman’s total workforce.
“The company reiterated its target for return on tangible equity (ROTE), a key indicator of profitability, between 15% to 17%. That’s higher than 2020’s 14% goal but still trails behind competitors Morgan Stanley and JPMorgan Chase which currently boast higher multiples,” Yahoo Finance’s Alexandra Canal says.
Toward the end of last year, Goldman announced a significant reorganization of the company’s structure, grouping the investment banking and trading divisions into one. Its wealth and asset management divisions also merged. Goldman’s fintech platforms and part of Marcus’ business are now in the banking company’s third division—Platform Solutions.
Solomon told investors this week that the asset and wealth management platforms would be instrumental in Goldman’s continued growth, Yahoo Finance reports.