If you thought Goldman Sachs was the ‘best investment bank in the world’, you could be wrong. In league table terms it’s long be roundly trumped by J.P. Morgan in most businesses. And last year, it performed worse than its U.S. rivals in almost every business area.
The chart below highlights Goldman’s sorry year. Compared to 2015, it did worse in M&A, worse in equity capital markets (ECM), worse in equities sales and trading and, worse in fixed income trading than Citigroup, Bank of America Merrill Lynch, Morgan Stanley and J.P. Morgan. The only business area in which Goldman Sachs outperformed its rivals was debt capital markets (DCM), and here it did so by a large margin. In every other area, it looks like Goldman lost market share last year.
How can this be? And more to the point, does anyone at Goldman care?
In answer to the first question, it might simply be that Goldman’s business areas did better than rivals’ in 2015, giving it a harder job of increasing revenues last year. This was certainly the case in terms of both equities and M&A. However, it doesn’t excuse the poor show in fixed income or ECM (Goldman’s fixed income trading business actually under-performed the market in 2015 too).
In answer to the second question, Goldman seems inherently untroubled by its apparent weakness. CFO Harvey Schwartz said the bank is in a “position of strength” as we go into 2017 and that everyone’s very happy with how the bank’s positioned. Sure, equities didn’t have the best end to the year, but “I wouldn’t read anything into that,” Schwartz said.
Goldman cut costs last year. The bank aimed for $700m of cost savings in the first half, but CFO Harvey Schwartz said today that it actually ended the year $900m down. It also cut headcount, ending the year with 400 fewer people than in 2015. Maybe it cut too deeply? More cuts may yet be coming: soon-to-be-CFO Marty Chavez said today that his reign, starting in April, will be all about “applying math and software to the problem of risk management.” That doesn’t bode too well for the non-programmers in the securities business.