David Solomon's early months as CEO of Goldman Sachs have long been on the rhetoric, as he promised to take a digital divide to the next level and rigorously review the firm's existing business, all the while embracing a new era of transparency and introducing a Millennial-friendly casual everyday dress code.
But for all the talk of future-proofing one of Wall Street's most venerable institutions, the bank's quarterly update on Monday failed to encourage investors looking for signs of Goldman's strategic rebirth. Its shares dropped nearly 4 percent, bringing their decline since Mr Solomon took over in October to 1
"So far, there has been sound and fury. . . "said Wells Fargo's banking analyst Mike Mayo, adding that Goldman's price-to-book value of about 0.95 is" one of the lowest non-crisis valuations in history. "
Jason Goldberg, a bank analyst at Barclays, said that while he had "definitely been progress" since Mr. Solomon took over, there was "much more work that can be done."
Here is Mr. Solomon's to-do list:
The master plan
The plan to take Goldman to the next era has been the single biggest talking point among investors and analysts since Lloyd Blankfein's 12-year reign as executive executive ended year Mr Solomon and his team promised a "front-to-back" review that would assess the allocation of resources and priorities across the business. An update was originally promised in the "spring" of 2019. On Monday, Goldman said the "comprehensive update" would come in the first quarter of 2020, while promising incremental progress reports before it. Many analysts were not happy.
"Christian Bolu, a bank analyst with Autonomous, who believes Mr Solomon is" doing the right things (by), "said Christian Bolu," we need to see his strategic plan and he needs to execute it before we can really judge him. " trying to move the business away from slow-growing legacy businesses to faster growing ones. "
Fixed income revamp
Fixed income trading was the problem child at Goldman when Mr Solomon took over. The fiscal year-on-year is the worst commodities year in 2017, and earnings in the fixed-income, currency and commodities division – known FICC – dropped by 22% worse than-peers between 2016 and 2018, triggering criticism that Goldman was not able to understand the secular changes in the business over the last few years.
Goldman's FICC performance has improved relative to other Wall Street banks in the last two quarters, partly because of the bank's low base. While Mr Solomon and his team have promised to redraw the FICC for today's opportunity, not the boom years of the past, concrete information on how this will happen has been scant.
On Monday's earnings call, executives spoke of leveraging technology across the FICC business, cutting resources to underperforming segments and investing in more promising ones. "It's still not clear," said Mr Mayo, adding that while Goldman "rattled off about a dozen areas" for potential growth, he still did not know what they actually plan to do.
Mass market revolution
Just like former trading executive Mr. Blankfein represented the face of Goldman in FICC's heyday, Mr. Solomon – an amateur disc jockey – became the embodiment of the bank's mass market future. Goldman's recent announcement of a credit card with Apple is a step in that journey, even though the financial implications of tie-up are unclear. Mr. Solomon also plans to expand Marcus, Goldman's online-only bank, and get deeper into managing money for wealthy Americans.
In investment banking, Mr. Solomon has accelerated Goldman's efforts to serve smaller corporate clients, announcing plans on Monday for a team of 100 investment bankers focusing on companies worth less than $ 2bn. Under Mr Solomon, Goldman is also pushing into the cash management business, an unglamorous business dominated by large commercial banks such as Citigroup, HSBC and JPMorgan Chase.
Investment banking rebound
Investment banking – and especially the advisory end of the business where Mr. Solomon built his career – has been a bright spot since he started. In the first quarter, Goldman grew advisory revenues by 51 percent, to $ 900m, far better than the 12 percent increase in advisory fees at rival JPMorgan's in the same period. Goldman also stormed ahead of JPMorgan to clinch the number one spot for M & A and equity capital markets revenues in the year to date.
The 1MDB legacy
The fallout from Malaysia's 1MDB's money laundering and bribery scandal has hung heavily over Mr. Solomon's early months at the helm. The US Department of Justice is investigating the bank, and Malaysia is suing it for $ 7.5bn over Goldman's role in helping the defunct state investment fund to raise $ 6.5bn, a billion of which was plundered. Mr Solomon on Monday said that while the "nobody wants to get a resolution at this faster than we do", the bank did not know when the situation would be resolved.
Goldman did announce in February that it was withholding millions of dollars in payments to three former executives, including Mr Blankfein, "until more information is available" about "ongoing government and regulatory investigations" into the 1MDB scandal. Goldman set aside $ 516m for litigation and regulatory issues in the fourth quarter of 2018, the bulk of which is understood to relate to 1MDB.