It was already cabled that this was going to be a rough week for Goldman Sachs.
The bank is said to be preparing to begin a round of layoffs later this week, the New York Times reported last Monday, citing anonymous sources.
And indeed it may have begun. Goldman has fired at least 25 bankers in Asia, Bloomberg reported on Tuesday, citing people familiar with the matter. The majority are junior-level bankers in areas such as equity capital markets, healthcare and telecoms, media and technology, the news service reported.
But the measure of a company—or a person, as the saying goes—is how one responds to adversity.
For Goldman, that could fuel growth wherever possible. The bank is rolling out Transaction Banking Services (TxB) in the European Union through a new team based in Frankfurt, Germany, the Financial Times reported on Tuesday.
Goldman also appears to have struck a credit card deal with T-Mobile, according to a Bloomberg report Tuesday, though the resulting opportunities will be slow to materialize.
The EU development could exude a business-as-usual vibe: when it began offering TxB in the UK last year, the bank said it intended to expand the business to several European countries by the end of 2021. TxB is the business of moving money around the world for large corporations through services such as cash management and treasury.
Jim Esposito, global co-head of investment banking at Goldman, called this week’s European push “a perfect case study of what [CEO David Solomon] wanted to see from Goldman Sachs.”
“This is new growth with stable, sustainable and recurring revenue,” Esposito told the Financial Times. “It fits like a glove.”
For Goldman, Esposito said on TxB last year, there’s a “billion-dollar revenue opportunity” at stake over the next few decades “if we get this right.”
But feelings of uncertainty about new business models at Goldman may be justified.
The bank once estimated that its six-year-old foray into consumer business, 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 that the Federal Reserve is reviewing the deal and seeking answers from management.
Neither the bank nor the Fed wanted to comment on the Bloomberg report. However, a review by the central bank is not an indication of misconduct.
But ultimately, three regulators are looking at different aspects of Goldman’s inner workings. The Consumer Financial Protection Bureau (CFPB) announced last month that it was investigating the bank over its credit card account management practices, including how it fixes billing errors and processes refunds. The Securities and Exchange Commission (SEC), meanwhile, is investigating Goldman’s wealth management division to determine whether investments in two mutual funds meet the environmental, social and governance (ESG) metrics their marketing materials tout, according to a June report.
The Fed’s questions could give Goldman another headache and cause concern for market watchers.
On this point, Credit Suisse analyst Susan Katzke wrote last month that Goldman’s management had assured her that the bank was shifting its focus away from retail banking and toward wealth management. An EU TxB push would correspond to this 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 obtain regulatory approvals and banking licenses for some moves.
“We’re doing this with the intention of going as global as we need to, in a very targeted way,” he said.
Meanwhile, a Goldman spokesman addressed the cuts in Asia, telling Bloomberg the bank “is moving forward.”[s] to remain flexible while executing on our strategic growth priorities.”
“Each year, we conduct a strategic assessment of our global resources and align headcounts with the current operating environment,” the spokesman wrote.
Elsewhere, Goldman employees may be entitled to hold their collective breath.
