Goldman Sachs Group Inc named David Solomon as its next chief executive officer on Tuesday, ushering in a new era for the Wall Street bank as it expands into different businesses and revamps familiar ones.
Solomonâ€™s promotion from his current role as president and chief operating officer comes months after the 56-year-old investment banker was first reported as next in line to succeed longtime CEO Lloyd Blankfein. His first day in charge is October 1.
â€œDavid is the right person to lead Goldman Sachs,â€ Blankfein said in a statement. â€œHe has demonstrated a proven ability to build and grow businesses, identified creative ways to enhance our culture and has put clients at the center of our strategy. Through the talent of our people and the quality of our client franchise, Goldman Sachs is poised to realize the next stage of growth.â€
The change comes at a turning point for Goldman Sachs, which is trying to generate another $5 billion in annual revenue by growing its fledgling consumer bank, squeezing more from businesses like asset management and changing the way it approaches trading.
Management detailed parts of that plan last September after years of insisting that Goldmanâ€™s once-lucrative trading business would come roaring back to life when markets picked up. Instead, since 2009, Goldmanâ€™s annual trading revenue has declined by $20.8 billion.
Unlike Blankfein, who rose through the trading ranks to become CEO, Solomon made a name for himself advising corporations on financing and strategy in Goldmanâ€™s investment bank. He joined as a partner in 1999 after working in commercial paper, junk bonds and leveraged finance at firms including Salomon Brothers, Drexel Burnham Lambert and Bear Stearns.
Alan Schwartz, executive chairman at Guggenheim Partners who worked with Solomon at Bear in the 1990s, said he showed natural leadership qualities early in his career.
â€œDavid is a very good big picture thinker while at the same time staying on top of all the details,â€ Schwartz said. â€œFinding both in one individual is unusual.â€
Several Goldman bankers who spoke to Reuters said employees in the business have been celebrating Solomon’s triumph in a long succession race.
Though he was considered a â€œdark horseâ€ candidate years ago, Solomon managed to outlast a number of rivals, including several from the trading business. Among them are former longtime chief operating officer Gary Cohn, who left Goldman last year for a role in President Donald Trumpâ€™s White House that he has since departed, and former co-chief operating officer Harvey Schwartz, who left the bank in April after Solomon was chosen as Blankfeinâ€™s successor.
Through most of its history, Goldman has alternated between traders and bankers as CEOs. There is natural tension between the two sides of the house at most Wall Street banks, especially after the trading losses and scandals that stemmed from the 2007-2009 financial crisis.
Nonetheless, Solomon will have to get traders and bankers to cooperate on the revenue growth plan, which depends partly on the idea that customers should rely on Goldman Sachs not just for merger advice or stock offerings, but for all their borrowing, trading and money management needs.
He may also pursue acquisitions to bolster Goldmanâ€™s consumer banking operation, or expand into areas like corporate cash management.
News of Solomonâ€™s appointment came on the same day Goldman reported second-quarter results, which showed a 44 percent profit rise but ongoing struggles in trading.
Beyond the business turnaround, Solomonâ€™s legacy will depend on whether he can fill Blankfeinâ€™s shoes.
The 63-year-old CEO, who took the helm in 2006, oversaw Goldman Sachs through its most difficult period in modern history, involving a taxpayer bailout during the financial crisis, protests over Goldmanâ€™s role in the crisis and massive regulatory changes that curtailed some of its most lucrative businesses.
â€œWeâ€™ve had tough days (or a crisis or two),â€ he joked in an internal memo viewed by Reuters announcing the succession plan.
Blankfein resisted pressure to leave during some of those moments, saying there was no better job to have. But in more recent years, he has joked that he does not want to die on the job like one of his predecessors, Gus Levy, who suffered a fatal stroke at a meeting.
He is stepping away at a time when Goldman Sachs is on steadier footing, but needs fresh leadership to reinvent itself, said Marty Mosby, a bank analyst at Vining Sparks.
â€œThat is what David Solomonâ€™s challenge is,â€ said Mosby. â€œThat is why theyâ€™re changing the management team.â€ (Reuters)