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After abandoning most of the bank’s fledgling consumer-lending business, Goldman Sachs Group
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CEO David Solomon said Tuesday that the investment bank plans to focus on growing its wealth and asset-management businesses to help preserve its dominance on Wall Street.
In an interview with Andrew Ross Sorkin on CNBC’s “Squawk Box” early Tuesday, meant to coincide with the bank’s annual investor day, Solomon said there’s “still some opportunity for us” in the consumer-lending business, and that “the real story of opportunity for growth for us in the coming years is around asset management and wealth management.”
Solomon dashed off a list of accomplishments for the bank’s wealth-management franchise, touting its platform as “the fifth-largest active manager in the world,” and saying that the bank is well on its way to bringing in $10 billion in fees annually.
However, Solomon’s comments prompted Sorkin’s colleague, Dominic Chu, to quip in a tweet that Goldman’s new focus appears to mimic a strategy embraced by its rival, Morgan Stanley
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Morgan Stanley’s reliance on managing money for wealthy clients over the past decade has been a smashing success. Managing money now accounts for more than half of the bank’s annual revenue, which topped $50 billion in 2022, according to the bank’s latest earnings report. As a result, its stock now trades at the largest premium to its book value among its peers.
What’s more, Morgan Stanley’s strategy has been “asset light,” meaning it allows the bank to make money without having to put its own capital on the line. Solomon sketched out a similar approach during his chat with Sorkin.
“We’re moving to an asset-light model. We have always used our balance sheet pretty extensively and we’re looking to move away from that,” Solomon said.
Despite the bank’s efforts in recent years to diversify its revenue streams, deal making and capital markets would likely remain the firm’s bread-and-butter businesses, Solomon said.
“Goldman Sachs is the leader in investment banking and markets…the relative performance in that business has been fantastic and that’s always going to be a big part of Goldman Sachs,” Solomon said.
The bank recently cut thousands of jobs as part of an effort to rein in costs after its consumer-lending hopes were dashed by poor performance.
Solomon and Sorkin also touched upon other Wall Street hot topics, including potential uses for ChatGPT and artificial intelligence, as well as Solomon’s outlook on inflation in the U.S.
“Inflation is going to be stickier and harder to move…but there’s a better chance that we could muddle through with a softer landing,” Solomon said.
Still, businesses are likely in for a bumpy ride, he said, a comment that mirrored remarks by Federal Reserve Chairman Jerome Powell.
“I think inflation is going to be sticky and hard and anybody running a business has to be prepared for a bumpy 12, 18 to 24 months,” Solomon said.
Goldman’s shares were off 2.2% Tuesday as its investor day started as Solomon emphasized that the bank is still seeking “strategic alternatives” for its consumer-banking business.
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