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3/26/2018 Goldman eyes expansion of investment banking

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© Reuters Ben McLannahan in New York MARCH 23, 2018

Goldman Sachs bankers will fan out around the globe to win a thousand more corporate clients, the chief executive told investors on Friday, as the Wall Street bank tries to bolster a division which has offset a prolonged slump in trading.

In his annual letter to shareholders, Lloyd Blankfein said the bank would increase its investment- banking coverage by “approximately 1,000 companies,” up from the current 8,000 or so, focusing on both private and public companies “where we have significant room to build relationships.”

The effort would be global, he said, but in North America would involve deploying more senior bankers to cities such as Atlanta, Dallas, Seattle and Toronto, describing them as “increasingly important hubs of corporate activity.”

The letter came a week after Goldman underlined the importance of investment banking by elevating David Solomon, a former co-head of the division, to the apparent position of CEO-in- waiting. Mr Solomon had been promoted to the role of co-president and co-chief operating officer just over a year ago, along with Harvey Schwartz, a former chief financial officer who had come up through the trading side of the business. Mr Schwartz is due to leave the bank next month.

The contrasting fortunes of the rivals for the top spot suggest that Goldman sees no immediate turnround in trading, and in fixed-income trading in particular, where clients such as hedge funds have been reluctant to put on big trades in listless, directionless markets. Mr Blankfein noted on Friday that the entire industry had been hurting, as overall revenues roughly halved from their

Goldman Sachs Group

Goldman eyes expansion of investment banking

Lloyd Blankfein says bank to increase coverage by about 1,000 companies

3/26/2018 Goldman eyes expansion of investment banking

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peak in 2009. But he said Goldman had “under-invested” in simpler products such as cash bonds,

“which led to lower penetration with certain large asset managers and banks.”

The doubling down in investment banking suggests that Goldman is “going where the margins are,” said David Hendler, founder and principal of Viola Risk Advisors. “The future is dealmaking, more relationships; they can’t just deal with the blue-chips and the next rung down.”

The aim to bring on 1,000 more clients is an unusual disclosure for a bank which has historically been wary of putting out hard targets. But Goldman broke from tradition last October, when it set out plans to earn

an extra $5bn in annual revenues. The biggest slice — $2bn — would come from financing and lending, the bank said, underscoring the importance of building stronger ties with corporate executives.

Last year Goldman’s net revenues from investment banking were $7.37bn, or 23 per cent of the total, compared to 20 per cent in 2016. In 2009, the peak of the post-crisis boom in trading, investment banking was just 11 per cent of the whole.

The future is dealmaking, more relationships; they can’t just deal with the blue- chips and the next rung down

David Hendler, Viola Risk Advisors