Last week, Goldman Sachs Group Inc (NYSE:GS) CEO Lloyd Blankfein made a point of saying he didn’t exactly know when he’d finally step down. Current and would-be owners of GS stock thought little of it, taking his words at face value and interpreting it as an “until further notice” and “unless things change” message.
Reading between the lines, though — and bearing in mind a successor CEO has already been selected — the fact that this conversation is even taking place (and the fact that Blankfein has clearly given the matter some thought) makes one think that it’s not crazy to assume that day is coming sooner than later.
It begs one question: What will Goldman Sachs look like without Blankfein at the helm.
Meet the New Boss
Twelve years. That’s how long Lloyd Blankfein has been CEO of the iconic investment bank. He was actually with the company much longer than that, though, becoming an employee of commodities trading outfit J. Aron & Co. shortly after Goldman acquired it back in the ’80s.
He’s clearly been around the block more than once and knows his way around Wall Street. That’s why he’s lasted longer as chief of one of the industry’s premier banks than most others have. That’s also why he’ll be missed when COO David Solomon, informally pegged as the CEO-elect, takes over.
It wasn’t a matter firmly assumed until very recently, when the other COO, Harvey Schwartz, pushed the chairman of the board of directors for the job, saying he would leave the company if not given Blankfein’s position soon. The gambit backfired, though. Blankfein said he preferred Solomon as the next CEO, and Schwartz announced his Apr. 20 retirement shortly thereafter.
Solomon was arguably the better choice. He too has been with Goldman Sachs for a while (20 years, to be precise), and during that time, he has made a name for himself as a team builder.
As one unnamed executive observed, “David has got everyone in a room talking about collaboration a lot more.” That collaboration would displace the intra-company competition between differing divisions that’s in the way right now.
Not the Same as the Old Boss
It will be more than just a different corporate culture under Solomon’s tutelage, though. Look for different divisions to be repositioned as a priority.
Under Blankfein, riskier trading operations were given the proverbial red carpet treatment, which makes sense. Blankfein cut his teeth at J. Aron & Co. as a commodity salesman and became something of a star with Goldman with that mindset and focus.
That’s not quite Solomon’s bent, though. Indeed, he was an investment banker with Bear Stearns while there still was a Bear Stearns. He’s also adeptly led Goldman’s investment banking work since joining the Goldman Sachs team a couple of decades ago.
While he certainly intends to keep the riskier-but-more-rewarding trading engine revving, by and large he’s a banking guy. He’s likely to give that arm a little more love than it’s gotten of late.
Wells Fargo analyst Mike Mayo said of the shift “This will be the first time in over a decade that a banker will be heading Goldman instead of a trader. It sets a tone that the bankers are going to steer the ship incrementally more than the traders.”
Wherever it comes from (including more consumer lending), Solomon is committed to the same $5 billion improvement in annual revenue Blankfein was touting late last year — a goal expected to be met by 2020.
Bottom Line for GS Stock
More often than not, the exit of a long-term and high-profile chief like Lloyd Blankfein can dent and ding a company; sometimes the organization is never quite the same again.
Goldman Sachs won’t be the same again either, but in this case, the CEO’s exit is not necessarily a damning event for the company or GS stock. Not only is Solomon an industry veteran, but a Goldman veteran with an expertise in an area that’s not been enough of a priority of late. Solomon seems to respect the idea that any division that could be a growth engine should be cultivated.
It’s not a sole reason to buy GS stock, but Blankfein’s impending exit is certainly not a reason to sell it.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.
