WALL STREET BLUES

Gold­man re­vamps

New York Post - - BUSINESS - By KEVIN DU­GAN kdugan@ny­post.com

Gold­man Sachs has a plan to fix its slump­ing trad­ing busi­ness — just give it three years.

That was the clunker of a pitch Tues­day from a top Gold­man exec, who said the Wall Street gi­ant aims to boost its rev­enue by $5 bil­lion, or roughly 17 per­cent, by 2020 — even as its trad­ing op­er­a­tion weath­ers a mer­ci­lessly stag­nant mar­ket for bonds, cur­ren­cies and com­modi­ties.

Tout­ing plans to hire more traders and woo cor­po­rate clients, co-chief op­er­at­ing of­fi­cer Har­vey Schwartz nev­er­the­less warned in­vestors on get­ting their hopes too high be­fore the end of the three­year pe­riod, say­ing that trad­ing since July has “felt a lot like the first and sec­ond quar­ters.”

Gold­man Sachs isn’t the only bank that has been dogged by lack­lus­ter trad­ing prof­its this year.

JPMor­gan Chase CEO Jamie Di­mon warned sep­a­rately on Tues­day that his bank’s trad­ing rev­enue was poised to plum­met 20 per­cent in the cur­rent quar­ter.

Echo­ing com­ments from Cit­i­group CFO John Gerspach — who said Mon­day his bank’s trad­ing would be off by about 15 per­cent — Di­mon warned that trad­ing has been es­pe­cially light ver­sus last year, when it was goosed by volatil­ity re­lated to Brexit and the US pres­i­den­tial elec­tion sea­son.

At a Tues­day con­fer­ence hosted by Bar­clays, Gold­man’s Schwartz said the bank aims to in­crease rev­enue in the longer term by hir­ing more trad­ing tal­ent and win- ning cor­po­rate clients in com­modi­ties and cur­ren­cies.

Look­ing to shrink its re­liance on the trou­bled hedge fund sec­tor, Gold­man is like­wise ex­pand­ing lend­ing across the firm, in­clud­ing to smaller clients of its Marcus con­sumer loan and de­posit busi­ness, to cor­po­rate clients and to pri­vate wealth man­age­ment clients.

Still, the hotly an­tic­i­pated turn­around plan — which Gold­man made pub­lic af­ter draw­ing crit­i­cism for a 40 per­cent plunge in trad­ing rev­enue it suf­fered dur­ing the sec­ond quar­ter — failed to con­vince some an­a­lysts.

“Gold­man’s growth strat­egy is fo­cused on pen­e­trat­ing new mar­kets or client seg­ments out­side of the com­pany’s tra­di­tional strengths, so we are some­what skep­ti­cal of the man­age­ment’s abil­ity to hit th­ese rev­enue tar­gets,” KBW an­a­lyst Brian Klein­hanzl wrote in a note.

Gold­man hopes to add $1 bil­lion in rev­enue from the trad­ing busi­ness by in­creas­ing the num­ber of traders and more ag­gres­sively pur­su­ing new cus­tomers, ac­cord­ing to Schwartz.

The other $4 bil­lion in rev­enue will come from lend­ing to com­pa­nies and con­sumers, as­set man­age­ment, in­vest­ment banking and stock trad­ing, he said.

The bank al­ready dou­bled its level of hir­ing, and sales and trad­ing now make up 43 per­cent of its fixed in­come, cur­ren­cies and com­modi­ties busi­ness, ac­cord­ing to a Tues­day pre­sen­ta­tion.

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