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Goldman plots return to banking growth mode through hires, investments



A
Goldman Sachs sign is displayed inside the company’s post on the
floor of the NYSE in New York

Thomson
Reuters


By Elzio Barreto

HONG KONG (Reuters) – Goldman Sachs Group Inc plans to add about
half a dozen senior bankers over the next six months or so and
invest more in Asia using its balance sheet as the Wall Street
firm seeks to switch to a growth mode in investment banking, a
top executive said.

After years of squeezing costs with lower headcount, tighter
compensation and retrenchment from some segments in investment
banking following the global financial crisis, Goldman is ready
to change tack, said Gregg Lemkau, who was named co-head at its
investment banking division in May.

“The mindset we’re taking on is one of a shift towards growth,”
Lemkau said in one of his first media interviews since assuming
the new post, during a trip through Asia.

“We’ve probably squeezed about as much as we can out of the
business and as we look ahead, we see an opportunity to invest in
growth to try to drive the business forward.” Investment banking
accounted for about 22 percent of Goldman’s half-year 2017
revenue.

Goldman’s shift to a growth focus in investment banking, which
has not been detailed before, comes amid a weak performance in
its core bond-trading unit, and an expected rollback of onerous
regulations for banks under the administration of U.S. President
Donald Trump.

The New York-based firm hired Credit Suisse veteran Jeff Douthit
in June, naming him a partner and head of global business and
consumer services.

It could add another two or three more senior hires by the end of
the year and another two or three in early 2018, Lemkau said.

“The initial focus is on a handful of strategic hires globally to
try and really grow the top line and drive the business,” he
added. “We’re not going to start adding aggressively… but we
would like to strategically and selectively enhance the team.”

STRATEGIC PRIORITIES

The company has hired about 25 people, mostly junior bankers,
over the past nine months to one year in Japan, Australia and
other countries in Asia, betting GDP growth in China and other
emerging economies will drive its investment banking revenue.

It plans to add more senior staff in China, after it hired
China-focused banker Bill Chu to its investment banking team in
the country in July.

“The strategic priorities have been on building out the regional
footprint with a particular focus on China,” Lemkau said. “The
growth in China, even in a more subdued GDP environment, is still
much more significant than anything else we see globally.”

Goldman also plans to broaden and deepen coverage of companies,
including unlisted ones, to tap investment banking opportunities
in debt financing, equity issuance or merger and acquisitions
(M&A) advice, he added.

The bank, an early backer of tech companies including Uber
Technologies Inc [UBER.UL] and music streaming service Spotify,
could also increase equity investments through its merchant
banking business, especially in Asia.

“If you look at our business opportunity globally, investment
banking fees in Asia aren’t as large as they are in the U.S. or
Europe, so the ability to create potential upside through
principal investing is even greater,” Lemkau said, declining to
specify potential deals.

He said U.S. M&A activity is expected to rebound in the
coming months as companies scout new opportunities. Deals have
declined in the aftermath of Trump’s election due to uncertainty
about his tax reform and deregulation agenda.

The consumer sector, as well as technology, media and
telecommunications (TMT) could lead the rebound in deals, Lemkau
said.

“You can envision the largest eight cable, telecom, wireless
companies in the U.S. becoming three in the next few years. Any
one of those would be a mega transaction. That’s a place where
there’s a lot of expected activity and strategic positioning,” he
said.

(Reporting by Elzio Barreto; Editing by Muralikumar Anantharaman)

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