Blame the new firm-wide "flexible dress code"... Profits at Goldman Sachs fell 21% last quarter, sending shares down 4% Monday. Wherever you look on Goldman's investment banking revenue menu, it was probably down:
- Trading ⬇️ 18%: Markets were calm and steady last quarter. That makes it harder for Goldman to buy things low and sell them high.
- Underwriting ⬇️ 24%: Goldman's guidance to companies that want to issue stock or debt to raise money took a hit. You can partly blame the government shutdown that delayed some IPOs.
- Mergers & acquisitions ⬆️ 51%: Goldman still gets to say it's #1 in advising companies getting hitched, but that makes up just 1/10th of its business.
Less harvest, less bacon... Slower business meant Goldman just cut comp. Salaries are generally fixed, but Goldman tightens its belt through bonuses — The average employees' pay fell to $91K in the 1st quarter of 2019 compared to $119K in last year's (that's 24% less $$$).
Time to pivot... Exotic/risky investment banking is Goldman's historic money-maker. Now management wants more reliable, steady, and boring businesses. At Goldman's age, it's trading in the Ferrari for the Buick. And the answer is "Marcus" (named for its founder):
- Marcus is Goldman's "Main Street" bank
- Its focus is checking accounts and loans to normal folk, not globo-corporates.
- And Marcus is teaming up with Apple for a consumer credit card.
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