A decade after the financial crisis rocked Wall Street, Goldman Sachs (GS) is still struggling to find a suitable way out of the resulting regulations. The annual trading profits of the company fell 84% this year which has significantly hurt its prospects. The bank now wants to test another strategy- it wants its traders to behave like investment bankers.
A new direction for the bank
Goldman CEO David Solomon is busy giving a fresh direction to the trading business of the bank. He is now investing extensively in automation technology and is replacing the top executives in the business. According to some bank insiders, he has even turned Marquee, the bank’s securities platform, into a saleable product. The bank has pledged to invest over $200 million by 2022 to hire coders and revamp and securities division technology.
Sources also suggest that trading salespeople at Goldman are already busy wooing corporate treasurers like Fidelity Investments. The division focused primarily on hedge funds but now portfolio managers and even algorithmic trading firms like Two Sigma and AQR have become their top priority. The staff in the trading division is now expected to get more meetings and their performance is analyzed on the basis of the size of new business they get.
Is Goldman running after an aggressive sales culture?
While the new approach sounds sales-y prima facie, the bank isn’t planning to sacrifice its signature central risk trading approach. According to an employee,
“That core is the key to the investment-banker approach and technology investments resulting in success.”
The quarterly trading revenue of the company rose 6% on Tuesday thanks to Deutsche Bank which pulled back from trading. The market remained volatile during the quarter which helped Goldman post better figures but overall, the market has been down 6% year-to-date. The bank’s executives understand that a quick turnaround of its fortunes is an impossibility. They may need years to get the company back on track. However, its shift in technology done in the last year has already started paying off.
According to Goldman’s global co-head for the securities division, Jim Esposito, the company’s client-centric strategy has finally started paying off some good returns. There is still hope for the bank in this business, even when most of its peers are stuck in a bad trading loop. It would be interesting to note how a renewed trading strategy works out for the bank.