WALL STREET BLUES
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.