Goldman Sachs' quest for normality - Comment & Profiles -

Few things epitomise the post-crisis banking landscape like Goldman Sachs' craving for normality, writes Brian Caplen.

It says a lot about how banking has changed over the past decade when the venerable Goldman Sachs is doing online retail banking under the Marcus brand and planning a move into cash management. Before the financial crisis Goldman was famed for its ability to call markets correctly and deliver huge profits from large proprietary positions.

These days Goldman is trying hard to be ‘normal’ and adopt something closer to a universal model. This means building up fee-based businesses such as asset management so that instead of being 10th or so in the global league table it moves nearer to the leaders. But this will be no easy task. Fees are under pressure as index products gain popularity and scale is key to success in asset management.

According to a report in the Financial Times, the asset management plans will form part of a new merchant banking division that will also contain the old proprietary investment business suggesting that the emphasis is now on managing third-party funds rather than on putting the bank’s own money to use.

These proposals are going to be fleshed out at the bank’s first ever investor day in January. The fact that a bank such as Goldman is even holding an investor day is a sign of the times. When returns on equity were running in the high 20s pre-crisis, an investor day was hardly needed. Now the suggestion is that at the investor day Goldman will avoid setting strict profitability targets, mindful perhaps of how banks in the current environment have a bad habit of missing them.

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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