NEWS UPDATE
SELL-SIDE
Goldman Sachs to merge investment banking , trading divisions
The bank is planning one of the biggest Wall Street reshuffles in years , with its key businesses reorganised into three divisions – one of which will bring together the investment banking and trading operations .
Goldman Sachs is to merge its investment banking and trading operations into one unit . The combined business will sit alongside two other divisions : one of which will absorb consumer banking arm Marcus into a new asset and wealth management arm , while the other will comprise transaction banking as well as the bank ’ s fintech platform portfolio , Apple and General Motors ventures , and recently acquired speciality lender GreenSky .
The move , which was first reported by the Wall Street Journal , is believed to be driven by a desire to boost feebased business , while reducing reliance on the more volatile investment banking and trading revenues .
The bank saw trading revenues surge over 2020-21 , delivering a strong performance , but slowed down significantly in Q4 2021 with a 13 % drop in quarterly profit and a notable slowdown in equities trading resulting in equities revenue $ 300 million below the $ 2.42 billion estimated for the quarter .
The poor performance has continued into 2022 – the bank reported a 47 % slump in profits for the second quarter , with net income falling from $. 5.5 billion to $ 2.9 billion in comparison with the same period last year , thanks to a 41 % drop in investment banking revenues .
CEO David Solomon ’ s surprise refit is designed to refocus attention on consumer banking business Marcus but is likely to ruffle a few feathers in the senior leadership team . It is not yet known how the changes will impact the executive suite , but co-head of trading Marc Nachmann is reportedly moving over to run the asset and wealth management arm .
REGULATION
The looming threat of mandatory buy-ins could soon disappear in Europe after new proposal
The European Parliament proposes dispensing of mandatory buy-ins altogether , while entry into the Official Journal of the European Union stops rule from coming into force until November 2025 .
The European Parliament published a report in
October in which it is proposing to dispense with mandatory buy-ins altogether . This follows similar recommendations from the European Commission .
“ This is a significant development if approved and clearly shows that the Parliament is sharing the concern that MBI creates a significant interference to the functioning of securities markets ,” wrote Paul Baybutt , global product head , middle-office at HSBC – one of the leading commentators on CSDR and former chair of the Investment Association ’ s Post Trade Committee for seven years .
It was also entered into the Official Journal of the European Union that mandatory buy-ins would not come into force until at least November 2025 . While the entry could be redundant if the Parliament ’ s proposal goes through , it acknowledged the drawbacks could outweigh the benefits .
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