Goldman Sachs Group Inc's Chief Executive David Solomon acknowledged the company had stumbled over its consumer business and moved to reassure investors that it had learned from its mistakes and would adapt its strategy.
The bank will aim to grow fees from asset and wealth management and try to make profits from a newly-created fintech unit as it laid out its priorities at the start of its second investor day.
The investment bank will outline the path to profit for
its Platform Solutions unit, which houses Goldman's transaction
banking, credit card and financial technology businesses, it
said.
It is also considering "strategic alternatives" for its consumer platforms, Solomon said, without specifying what those options would be.
The bank restated a longer-term target for return on
tangible equity of 15% to 17% "through the cycle" and said it
had "significant" room to grow market share for wealth
management in the United States and globally.
Shareholders are awaiting more detail about its plans for
Platform Solutions, formed after Goldman lost billions on its
foray into consumer banking and reined in its ambitions. The
pullback on costs could help the bank to meet its efficiency
targets.
"Sometimes we fall short. Sometimes we don't execute. But we always learn and adapt," Solomon told investors. Chief Executive David Solomon's performance and his plans for growth will also be scrutinized by investors and analysts. Observers will focus on his plans to decrease Goldman's reliance on trading and investment banking, which can be whipsawed by market volatility.
The bank has said it plans to slim down some alternative investments that weighed on profits last year. "We will identify a $30 billion historical principal investment portfolio earmarked for sell-down and lay out a plan to reduce this portfolio to zero over the medium term," the bank said.
UNCERTAIN ENVIRONMENT "Earnings could continue to be subdued for the next year or more, as the economic environment remains uncertain, which should pressure investment banking and asset management revenue," said Michael Wong, an analyst at Morningstar Inc.
After a solid performance in recent years, Goldman's markets division could weaken in the short-to-medium term because "trading is a wild card," he said.
Solomon also warned in an interview with CNBC that operating
in China will get tougher over the next couple of years, but
added that the bank would continue to serve clients in the
country.
"We are at a very tough place in bilateral relationship
with china and my own view is it only gets tougher ... It is a
more 'cautious' time for investment in our own franchise,"
Solomon said.
The relationship between the two largest global economies has worsened in recent months over Taiwan and the downing of a Chinese spy balloon that was found flying over the U.S. earlier this year.
Shares in the bank were up 0.2% in premarket trade on Tuesday.
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ANALYSIS-Goldman Sachs CEO, after missteps, to take center stage
at investor day ANALYSIS-Wall Street heavyweights warn of pain ahead despite
market’s recent reprieve ANALYSIS-Goldman Sachs' consumer pivot solves one question, but
makeover raises more Goldman Sachs executives to rally investors in New York Goldman expects $2.3 bln more in potential losses from legal
disputes Goldman Sachs' long-running gender bias lawsuit set for June
2023 trial U.S. bank CEOs see economic pessimism lifting, but focus on
costs, jobs Goldman Sachs slashes CEO Solomon's pay 29% to $25 million ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Niket Nishant and Noor Zainab Hussain in
Bengaluru and Saeed Azhar and Lananh Nguyen in New York; Editing
by Arun Koyyur and Nick Zieminski)
