Goldman Sachs (GS) CEO David Solomon addressed negative headlines surrounding the bank’s culture during the company’s second-ever investor day on Tuesday.
“I hate the noise,” Solomon said bluntly. “I live in the same neighborhood as you all live in and I wish the noise was different.”
Various media reports of mass partner exits, coupled with recent Wall Street chatter the bank has lost its way after the failure of its consumer banking project Marcus, have all contributed to unfavorable sentiment. And this coming after the company laid off some 3,200 workers’ positions, or a little over 6% of its headcount, in January after a challenging 2022.
Solomon admitted mistakes were made, telling investors: “I think we’ve accomplished a lot over the past few years. We got some things right, got some things wrong.”
“I read things in the paper that don’t match what’s happening inside the firm,” Solomon continued, explaining there were fewer partner transitions in 2022 than any other year going back to 2014.
“The culture of Goldman Sachs is incredibly strong. …We have an extraordinary group of people working incredibly hard,” he said. “We also recognize we’ve gone through a very unusual period over the last 3 years — the pandemic was a very tough thing on a culture like ours.”
Goldman Sachs shares, down about 5% over the past month, are trading relatively flat year-to-date — underperforming the S&P 500’s 3% gain over that same time period.
Solomon went on to note Goldman is a “human business,” explaining the firm has made conscious decisions to invest in its culture with leadership spending more time with partners throughout the year to help push a greater sense of community throughout the organization.
“We’re going to continue to invest in our culture. I think it’s very good, [but] I do think we’ve had dramatic shifts,” he said, once again referencing the pandemic which was quickly followed by an unfavorable macro environment. “That created more noise, more grumbling than usual.”
Overall, “I feel good about the partnerships [and] the culture, but that doesn’t mean we don’t have to keep investing,” he reiterated.
Goldman saw a rough end to 2022 with profits down a whopping 69% in Q4 amid a serious decline in deal-making revenues, pressured by a weakening economic backdrop.
Following Tuesday’s presentation, analyst reaction appeared cautiously optimistic, although questions remain over the path to profitability for its consumer banking unit, otherwise known as platform solutions.
Shares of Goldman fell about 4% on Tuesday as the company made its pitch to investors.
“Coming out of the conference, the buzz among investors was whether GS will grow the consumer businesses or sell parts of them. Our interpretation of management’s commentary is that both options are on the table,” Morgan Stanley analyst Betsy Graseck wrote in a new note published on Wednesday.
Graseck maintained her Equal Weight rating and reiterated a 12-month price target of $332 a share.
Graseck added all three business segments, which also includes investment banking and trading along with wealth and asset management, “have an opportunity to contribute to Y/Y EPS growth as GS targets growth opportunities and gets more efficient.”
Goldman reported a net loss of $660 million in its platform solutions unit in the fourth quarter with a full-year net loss settling at $1.67 billion. The company blamed the decline on higher provisions for credit losses, but stressed on Tuesday: “Profitability is not a strategy. It is a priority and the outcome of a strategy well executed.”
Bank of America analyst Ebrahim Poonawala told clients Wednesday Goldman’s profitability push seemed genuine, writing: “While investors looking for instant gratification may have been disappointed, we believe that management is on the same page with shareholders in that it appreciates the need to further shrink its consumer exposure “unlock value” (specifically, card partnerships and point-of-sale lending).”
Poonawala maintained a Buy rating and reiterated a $384 price target on the stock.
