Goldman Sachs Group Inc (GSN) believes they can get back their money-making mojo proposing creative deals to large, complex clients, making a return to their investment banking roots as trading revenue slows down.
The Wall Street bank is forming a new unit, the Innovation Lab, which will focus on generating exciting deal ideas for companies like Warren Buffett’s corporation Berkshire Hathaway Inc. The new “brain trust,” is focused on boosting investment banking revenue as trading has faded and market trends are cutting deeper than competition.
Led by Goldman executives Brian DeCenzo and James Morris, the unit will perform a diverse role focused broadly on proposing mergers and acquisitions to larger companies. The unit is required to come up with out-of-the box ideas and concentrate on the clients who want to acquire or make large investments in businesses across industries.
DeCenzo and Morris are former parts of Goldman’s financial sponsors group, which seeks deals for private equity firms. The Innovation lab is the newest change under new management of the bank, which earlier this year promoted Gregg Lemkau and Marc Nachmann as co-heads with John Waldron. Under the new leadership, Goldman has increased bankers to cities to serve local clients more personally and employed dealmakers at the partner level from their Wall Street competitors.
From 2009-2016, Goldman’s annual trading revenue decreased by $18 billion or 32 percent. During the same period, investment banking revenue increased by $1.3 billion or 26 percent. Analysts expect Goldman to report a decline for the third quarter in a row.
Executives emphasize Goldman’s investment roots and use it as a strategic adviser to corporations, wealthy families and investment funds. The company has also expanded the area of consumer lending. While fees from these services are more consistent than trading, Goldman will not be able to replicate the revenue from its stock and bond market any time soon.