Goldman creates new role in growth push

Tom Braithwaite

Goldman Sachs is planning to increase the size of its commercial bank and wealth management division as part of a quest for growth, according to people familiar with the matter.

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The moves are part of the mandate of Stephen Scherr, a 21-year Goldman veteran, who was promoted to a new position of chief strategy officer on Monday in a management reshuffle.

Adam Jeffery | CNBC

The appointment of Mr Scherr, 50, who is currently global head of financing, was announced in internal Goldman memos, and includes a role to "help co-ordinate our lending business as we leverage our existing bank platform to provide credit to both corporate and individual clients."

Mr Scherr has been working with Lloyd Blankfein, chief executive, for several weeks to work out how to increase the size of Goldman's commercial bank, according to the people familiar with the moves. The development is a potential threat to incumbents such as JPMorgan Chase and Bank of America.

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It represents the latest shift of focus for Goldman, which has traditionally operated a small balance sheet, concentrating on trading, advising companies and raising their debt and equity. It grew in 1999 when it went public and only became a bank holding company during the financial crisis.

The move into more bank lending will not involve a big retail presence, and there are no plans for Goldman branches across the US. But the wealthiest individuals will be a target for the bank's expansion, and for the potential expansion of the private wealth management division.

Goldman's wealth management division caters for a far richer clientele than rivals such as Morgan Stanley. Gary Cohn, Goldman president, told a conference last week that the average account balance was $40m.

People familiar with Mr Scherr's appointment said it did not herald a strategy about-face, with senior executives firm in the belief that existing weak trading conditions are largely a cyclical phenomenon – a contrast to the view at rivals.

Nor is the appointment purely about implementing new regulations which are reshaping the industry, such as the Volcker rule, which prohibits proprietary trading and which some executives blame partly for a sharp fall in revenues in trading bonds, currencies and commodities.

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But Mr Scherr is charged with finding new adjacent businesses in which Goldman might improve its return on equity. Goldman's ROE was 11 per cent in 2013, better than rivals but still shy of its pre-crisis profitability levels.

In other moves announced on Monday, Andrew Chisholm is retiring as senior strategy officer at Goldman after 30 years, much of which was spent in the financial institutions group advising other banks and insurers on mergers and acquisitions.

Jim Esposito, head of financing in Europe, and Marc Nachmann, co-head of natural resources, were appointed co-heads of the global financing group, replacing Mr Scherr.

By Tom Braithwaite of the Financial Times