Goldman Sach's New York headquarters
New York (AFP) - Goldman Sachs signaled Monday that it is likely to appoint David Solomon as its next chief executive as it emphasizes lending and client advisory services and focuses less on trading.
The storied investment bank announced that co-president Harvey Schwartz would retire, leaving Solomon the firm’s lone president, a move that many Goldman Sachs watchers viewed as a key step in succession.
“David Solomon will serve as sole president and chief operating officer of the firm upon Harvey’s retirement,” Goldman said in a news release.
The announcement comes amid speculation over the future leadership of Goldman following a Wall Street Journal report Friday that current chief executive Lloyd Blankfein could retire as soon as this year.
Long seen as the undisputed king of Wall Street, Goldman Sachs has come under greater scrutiny over the last year or two as returns of its once-formidable trading divisions have languished and as rival Morgan Stanley has won plaudits for its asset management services.
Solomon’s profile differs from many earlier Goldman CEOs, who have risen through the ranks with a heavy focus on trading. Blankfein, for example, led divisions that covered currency, commodities, fixed income and equities trading.
Solomon, prior to being tapped co-president in December 2016, worked for a decade as co-head of investment banking.
“You’re not promoting someone who’s strictly a trader because that is something they been working on and have been under fire about,” said Morningstar analyst Michael Wong.
“The future of Goldman Sachs is going to be on the advisory side of investment banking, customer services, new market opportunities like retail banking and taking their capital and making principal investments or loans,” said Ken Leon, an analyst at CFRA Research.
“It’s less about putting more dollars on the trading desk because trading in the best case is cyclical, and worst case it’s changed since the financial crisis with steep regulation.”
Leon expects that Goldman will make a formal announcement before the end of the year on a new chief executive, probably Solomon.
There would be an interim period with Solomon as chief executive and Blankfein serving as executive chairman before leaving the firm at the end of 2018 or in the first quarter of 2019.
- Shifting mission? -
Vertical Group analyst Dick Bove, who sharply criticized Blankfein’s leadership of Goldman, said selecting Solomon would position the bank for new opportunities amid changing US policies on taxes, trade and potentially fiscal stimulus.
“In this probable new world, the use of capital to build out corporate expansion plans is highly likely. The need for investment banking and lending from large financial institutions will grow,” Bove said.
“Selecting David Solomon to lead this new charge is absolutely the right decision.”
Picking Solomon is consistent with Goldman’s growth plan outlined last fall in which it emphasized greater investment banking presence in the middle market, as well as stepped-up operations in asset management and newer ventures in online banking, said Wong.
“You’re not going to put in a traditional retail or commercial banker because I don’t think they’re ever going to be that heavy into traditional deposit taking,” he said.
And picking a leader in digital banking, still a tiny portion of Goldman Sachs, would be “disruptive” to the firm’s other businesses, Wong said.
Shares of Goldman Sachs finished up 1.0 percent to $273.38.