Goldman Sachs (GS) executives led by David Solomon outlined a new path forward for the firm at its second-ever investor day on Tuesday.
"Our franchise is strong," the CEO told the crowd during his opening remarks, addressing recent Wall Street chatter the bank has lost its way. "Success is not a given. Sometimes we fall short, sometimes we don't execute, but we always learn and adapt."
Solomon stressed the bank's main objective remains outperforming for clients: "We are stewards of their trust."
Industry watchers have been closely monitoring Goldman's asset and wealth management unit, which boasts about $2.5 trillion in assets and has been branded as the key to unlocking value after the company's failed foray into consumer banking.
Goldman's consumer banking project, dubbed Marcus, was originally created to attract Main Street interest and take on competitors like JPMorgan Chase (JPM) but failed as the bank was plagued by higher interest rates, a shaky macro environment, and what previous reports have categorized as a negative culture with bruised egos.
Solomon addressed the Marcus fiasco during Tuesday's investor day: "It was clear we lacked [a] certain competitive advantage and we did too much too quickly, which affected our execution."
"There were some clear successes but there were also some clear stumbles. ...We learned a lot," he continued. "I certainly think we could have done a better job in a substantive way bringing you all along."
In October, the company announced a sweeping reorganization that merged its investment banking and trading businesses into one division, while its wealth and asset management businesses became a single unit. A third division, called Platform Solutions, now houses its fintech platforms and includes a subset of Marcus' business, its credit card partnerships with Apple (AAPL) and GM (GM), along with GreenSky — the fintech lender Goldman acquired last year.
"Our asset and wealth management platform is the key driver for growth as we look forward as a firm," Solomon told investors on Tuesday.
Management laid out a 3 to 5 year plan for its wealth management unit that includes a, "high single-digit percentage organic durable revenue growth from management fees and private banking and lending," as well as a mid-twenties pre-tax margin, and mid-teens segment return on equity.
The company added it is "laser-focused" on continuing the transition of its on-balance sheet investment portfolio to a third-party funds model.
"We will identify a $30 [billion] historical principal investment portfolio earmarked for sell-down and lay out a plan to reduce this portfolio to zero over the medium term. We will continue to leverage our balance sheet to seed new strategies and demonstrate alignment with our LPs – a very powerful differentiator," the company said.
For its Platform Solutions unit, the company stressed profitability: "Today, we will show progress to breakeven and a clear path to pre-tax profitability. Profitability is not a strategy. It is a priority and the outcome of a strategy well executed."
Goldman reported a net loss of $660 million at its platform solutions unit in the fourth quarter with a full-year net loss settling at $1.67 billion. The company blamed the decline on higher provisions for credit losses.
During Tuesday's presentation, the company said it was open to exploring "strategic alternatives" for parts of the consumer business, which could include a sale or more restructuring.
Goldman saw a rough end to 2022 with profits down a whopping 69% in Q4 amid a serious decline in deal-making revenues, pressured by a weakening economic backdrop.
The bank made substantial cuts to its workforce as a result, eliminating 3,200 positions, or a little over 6% of its headcount, in January and working on further efforts to streamline operations.
The company reiterated its target for return on tangible equity (ROTE), a key indicator of profitability, between 15% to 17%. That's higher than 2020's 14% goal but still trails behind competitors Morgan Stanley (MS) and JPMorgan Chase which currently boast higher multiples.
Alexandra is a Senior Entertainment and Media Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at alexandra.canal@yahoofinance.com
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