Goldman Sachs creates tech-focused "Platform Solutions" in restructuring

October 18, 2022 7:55 PM

Jim McNamara joined Goldman Sachs in 1998, became managing director in 2000 and made partner in 2006.

Goldman Sachs is shifting away from investment banking and trading to focus instead on its wealth management business and tech portfolio, as a choppy economy takes a toll on Wall Street.

In an earnings call Tuesday with analysts, CEO David Solomon said the bank was focused on getting to a "One Goldman Sachs" model of integrated businesses. To that end, Solomon said, the bank would combine its assets and wealth management units into one segment, streamline the investment banking and global markets units into another and create a third segment called "Platform Solutions" that will unify fintech platforms including transaction banking, consumer partnerships and home improvement lender GreenSky.

Marc Nachmann, currently the co-head of global markets, will lead the combined asset management and wealth management businesses. Dan Dees, Jim Esposito and Ashok Varadhan will run the new banking and global markets division. Stephanie Cohen, currently the global co-head of consumer and wealth management, will run the new tech unit. The shuffles were first reported in a company memo cited by the Wall Street Journal.

Goldman's struggling retail banking unit Marcus will be split among the new groups, with the consumer-facing side under Nachmann and the rest under Cohen.

The shakeup across the investment bank's teams represents a doubling back for Solomon, who in 2020 had split apart the wealth and asset management businesses.

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To see the main takeaways from Goldman's third-quarter earnings, scroll down the slideshow. For coverage of the firm's second-quarter earnings, click here. For a look at the results from the first quarter, follow this link.

Financials

Profits at Goldman Sachs fell 43% year over year in the third quarter of 2022 to $3.1 billion from $5.4 billion, but the company beat consensus earnings estimates with an earnings per share, or EPS of $8.25. It also had quarterly net revenue of $12 billion.

The gains were largely buoyed by strong showings in the consumer and wealth management and global markets divisions, the firm said in its earnings presentation.

Platform Solutions

Solomon called Platform Solutions "an end-to-end, primarily cloud-based technology platform business" that embeds the company's financial products and services "into our clients' ecosystems." The group will target corporate and institutional clients and build on partnerships announced already with clients such as Apple, General Motors, Stripe, American Express and Fiserv, Solomon said, adding that with the new Apple Card partnership announced last week, the company could offer its high yield savings account within the Apple Wallet. "Goldman Sachs and Apple are committed to expanding our relationship, and we have recently extended and adjusted our partnership through the end of the decade in order to continue to help consumers with healthier financial lives."

Expenses

Net operating expenses grew by 17% year over year to $7.7 billion. The firm attributed this largely to increased compensation and benefits for staff, as well as the costs of recent acquisitions.

Provisions for legal and regulatory expenses grew to $191 million — nearly four times the $52 million set aside at the same time last year, reflecting the bank's recent high-profile lawsuits and heightened scrutiny from regulators like the SEC and CFPB.

The bank also disclosed a provision for credit losses of $515 million — nearly triple the provision of $175 million a year ago, though still down from the second quarter's $667 million. This was attributed to "consumer portfolio growth, net charge-offs and the impact of continued broad concerns on the macroeconomic outlook," the company said in its earnings presentation.

Goldman Sachs creates tech-focused "Platform Solutions" in restructuring

Financials

Platform Solutions

Expenses

Remark