Goldman Sachs Overview: Goldman Sachs is a broker-dealer, investment bank and asset manager. In 2008, Goldman formed a bank holding company structure by Federal Reserve mandate and created Goldman Sachs Bank USA (GS Bank). The lines of business include:
- Securities Trading & Principal Investments
- Investment & Asset Management
- Investment Banking
- Securities Services
- Interest & Investment Income
The firm features among the largest in the financial industry: 39th in the Fortune 500, after Bank of America Merrill Lynch, J. P. Morgan Chase, Citigroup and Wells Fargo (as of 2010) and is one of the Dow Jones Global Titans. Goldman's Private Client Group serves some of the world's wealthiest individuals and families. It ranked sixth in comparison to other global wealth management groups in 2009. (Bank of America Global Wealth & Investment Management ranked first, followed by Morgan Stanley, Wells Fargo and Company, JP Morgan Chase and Union Bank of Switzerland Wealth Management.) The Private Client Group works in concert with Goldman Sachs Asset Management:
- Total GS Employees = 32,500
- High Net Worth Wealth Managers = 350 (as of September 2009)
- Assets in Private Client Accounts = $215 billion (as of September 2009)
- Locations in the Americas, Asia, UK/Europe, Australasia, India, EMEA, Russia (29 countries)
History and Corporate Culture: Goldman Sachs' Business Principles provide a code of conduct and state the firm's values as well as the importance of its employees. Goldman's culture values long-term relationships and development rather than unsustainable and transaction-driven goals.
Positives: Because of Goldman's extensive global presence, many career opportunities within the firm exist. The firm's training program orients new and experienced hires. After orientation, Goldman employees work with a mentor.
Goldman announced plans to expand its asset management business in 2009 and discussed the possibility of an acquisition. Several wealth managers left the firm for more attractive payouts elsewhere in 2009 and 2010. Goldman continues to hire new MBAs. The total number of wealth professionals is likely to rise as wealthy individuals, families and their businesses seek the firm's Midas touch.
Financials: In comparison with its main competitors, Goldman turned in higher profit margins than the other large firms. Goldman's revenue per share of almost $75.00 (2009) compared to JP Morgan Chase's $26.00 and Morgan Stanley's $22.00 in the same period attests the firm's ability to lead the competitive landscape in profitability.
Negatives: Goldman fared much better than smaller, more thinly capitalized U.S. rivals Lehman Brothers and Bear Stearns during the economic downturn that spiked in 2008. The decision to pair broker-dealers with bank assets caused Merrill Lynch, another U.S. major broker-dealer, to partner with Bank of America in order to maintain its operations.
The U.S. Government infused capital into Goldman. A U.S. economic stimulus package agreed to purchase more than USD 250 billion of preferred stocks issued by U.S. banks. Goldman received approximately USD 10 billion from the program. Goldman also cut 10 percent of the workforce and lowered employee bonuses. Goldman quickly repaid the government and re-established strong financials. Top executives received no cash bonus awards in 2009. To demonstrate frugal ways at Goldman, the firm asked employees to avoid traditional holiday parties that year.
Goldman received more negative attention from the financial community in 2010 as the Securities & Exchange Commission accused the firm of fraud. A former Goldman executive turned hedge fund manager designed a sub-prime mortgage product called Abacus. Goldman sold the product to clients while the hedge fund manager bet against his own product. The housing crisis, along with the overall poor financial environment, caused a drop in the product's value. Goldman Sachs paid approximately USD 550 million to resolve a civil suit against the firm while admitting no wrongdoing.
While Goldman's recovery from the depths of 2008's crisis appears established, the firm has suffered some damage to its reputation. However, Goldman Sachs continues to number among a short list of the world's top broker-dealers.
Financials: In 2010, Goldman's settlement amounts have impacted earnings as the competitive landscape rebalances operations.
Strategy: Goldman's decision to focus on its corporate clients, with more than USD 900 billion under management, over the Street's decision to diversify offerings differentiates the firm. The decision may create opportunities for the firm's competitors.
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