This was already telegraphed to be a tough week for Goldman Sachs.
The bank is said to be preparing to launch a round of layoffs as early as this week, The New York Times reported last Monday, citing anonymous sources.
And indeed, it may have begun. Goldman has cut at least 25 bankers in Asia, Bloomberg reported Tuesday, citing people familiar with the matter. The majority are junior-level bankers in areas such as equity capital markets, health care and telecommunication, media and technology, the wire service reported.
But the measure of a business — or a person, as the adage goes — is how one responds to adversity.
For Goldman, that may be fostering growth where it can. The bank is rolling out transaction banking services (TxB) in the European Union through a new Frankfurt, Germany-based team, the Financial Times reported Tuesday.
Goldman also appears to have struck a credit-card deal with T-Mobile, according to a Tuesday report from Bloomberg, though resulting opportunities may be slow to develop.
The EU development may emanate a business-as-usual vibe: The bank said when it began offering TxB in the U.K. last year that it intended to expand the business into several European countries by the end of 2021. TxB is the business of moving money around the world for large companies through services such as cash management and treasury.
Jim Esposito, Goldman’s global co-head of investment banking, characterized this week’s European push as “a perfect case study for what [CEO David Solomon] wanted to see from Goldman Sachs.”
“This is new growth, with sticky, durable and recurring revenues,” Esposito told the Financial Times. “It fits like a tight glove.”
At stake for Goldman, Esposito said last year of TxB, is a “revenue opportunity measured in multiple billions” over the next decades “if we get this right.”
But feelings of uncertainty regarding new business models at Goldman may be justified.
The bank, at one point, estimated its six-year-old jaunt into consumer banking, Marcus, would be profitable by 2022. But as of June, the unit was on track to lose $1.2 billion this year. And, Bloomberg reported Friday, the Federal Reserve is reviewing the business and seeking answers from management.
Neither the bank nor the Fed would comment on the Bloomberg report. A review by the central bank, it should be noted, is no indication of wrongdoing.
But at last count, that makes three regulators looking into various aspects of Goldman’s inner workings. The Consumer Financial Protection Bureau (CFPB) said last month it is investigating the bank over its credit card account management practices, including how it resolves billing errors and processes refunds. The Securities and Exchange Commission (SEC), meanwhile, is investigating Goldman’s asset-management division to see whether investments in two mutual funds are meeting the environmental, social and governance (ESG) metrics their marketing materials tout, according to a June report.
The Fed’s questions may count as another headache for Goldman and a cause for concern from market observers.
To that point, Credit Suisse analyst Susan Katzke wrote last month that Goldman management assured her the bank is shifting its emphasis away from retail banking and toward wealth management. An EU TxB push would line up with that priority.
Goldman is considering opening transaction banking offices in Amsterdam and Japan in the near term, Esposito told the Financial Times, adding that the bank still needs to gain regulatory approval and banking licenses for some moves.
“We’re doing this with intent, in a very purposeful fashion, to get as global as we need to be,” he said.
Addressing the Asia cuts, meanwhile, a Goldman spokesperson told Bloomberg the bank “continue[s] to remain flexible while executing against our strategic growth priorities.”
“Every year globally we conduct a strategic assessment of our resources and calibrate headcount to the current operating environment,” the spokesperson wrote.
Goldman’s staff elsewhere may be justified in holding its collective breath.
