Tags: Goldman | Trading | Chiefs

Goldman Trading Chiefs Join Partner Exodus as Profit Sags

Thursday, 12 January 2012 10:42 AM

Goldman Sachs Group Inc. said two leaders of its biggest division are leaving the company a week before it reports what some analysts predict will be the lowest annual profit since the firm went public.

Edward K. Eisler, 42, and David B. Heller, 44, are retiring from the company, where they helped lead the securities trading division since February 2008, according to two internal memos obtained by Bloomberg News yesterday. Eisler, an Austrian based in London, joined the bank 18 years ago and has a background trading interest-rate products, currencies and commodities. Heller, a U.S. citizen who lives in New York, spent more than 22 years at the firm, mainly in equities and equity derivatives.

Goldman Sachs, the fifth-biggest U.S. bank by assets, derived more than 60 percent of its revenue from trading in the first nine months of last year. The business is contracting as investors become more cautious and regulators demand banks hold more capital and curb proprietary bets, leading Goldman Sachs Chief Executive Officer Lloyd C. Blankfein, 57, to cut jobs and other expenses.

“This is not as appealing a sector to work in for the time-being,” Roger Freeman, an analyst at Barclays Capital in New York who has an “equal-weight” rating on Goldman Sachs, said in a phone interview. For executives like Eisler and Heller who already have accumulated wealth “this could be a great time to just take a few years off, spend it with your kids, and you’re not missing anything.”

Succession Plans

The departures will add to speculation about succession plans at the top of New York-based Goldman Sachs, where Blankfein has held the chairman and CEO roles since mid-2006. Heller sometimes is brought up as a possible future CEO, even as president and chief operating officer Gary D. Cohn, 51, Blankfein’s top deputy, continues to be the leading candidate.

Isabelle Ealet, 48, the bank’s London-based global head of commodities since 2007, will become one of three co-heads of the securities division alongside Pablo J. Salame, 45, and Harvey M. Schwartz, 47, according to another internal memo obtained by Bloomberg News. Michael DuVally, a spokesman for the company, confirmed the memos’ contents and declined to comment further.

Ealet, a French citizen who started at Goldman Sachs as an oil trader in 1991, already is a member of the management committee and will continue to be based in London. As the only woman on Goldman Sachs’s management committee to oversee a revenue-producing unit, she’s one of the most powerful women working at a Wall Street firm. She started her Goldman Sachs career at the commodities trading division J. Aron, as did Blankfein and Cohn.

Rutgers University

Schwartz also started in Goldman Sachs’s commodities division, joining in 1997. A New Jersey native based in New York, Schwartz helped run fixed-income sales and the financing group before taking his current role. In October 2010, Schwartz donated $1.5 million to Rutgers University, from which he graduated in 1987.

Ealet and Schwartz are close to Cohn, according to former Goldman Sachs employees.

Salame, an Ecuadorian who moved to New York from London last year, joined the firm in 1996 and helped manage global credit, mortgages, emerging-markets trading and equity derivatives before taking his current role.

Eisler and Heller join about 50 Goldman Sachs partners who left the firm in the past 12 months, according to company filings, internal memos and news reports. The bank elects its most successful employees to a so-called partnership every other year, granting them access to a special compensation pool, to maintain the culture of the partnership the firm ended when it went public in May 1999.

Gasvoda, Hunt

Other recent departures include James B. Clark from asset management, Kevin S. Gasvoda from fixed-income and Edith A. Hunt, who helped manage the personnel division, according to a company filing. None responded to e-mails seeking comment.

Eisler and Heller will become senior directors, according to the memos. Senior directors advise the firm on matters related to their areas of expertise and aren’t employees.

“Both of these executives have a risk-taking background at Goldman and are relatively young and may have perceived greener pastures elsewhere,” Gregory Cresci, an executive recruiter at Odyssey Search Partners in New York, said in a phone interview.

Interest in Politics

Heller, who didn’t respond to phone and e-mail messages seeking comment, has demonstrated an interest in politics, helping to raise money for President Barack Obama’s election in 2008, and in sports. Heller became a part-owner of the Philadelphia 76ers basketball team last year, according to the National Basketball Association, and was part of a group that tried to buy the New York Mets baseball team, according to the New York Post. Eisler didn’t reply to an e-mail seeking comment.

“The vast majority of traders at Goldman who leave go on to start their own hedge funds,” William Cohan, author of “Money and Power: How Goldman Sachs Came to Rule the World” and a Bloomberg View columnist, said on Bloomberg television.

Eric S. Lane, Stephen M. Scherr and Ashok Varadhan were named to the firm’s management committee, according to a separate memo yesterday from Blankfein and Cohn.

Lane, who former Goldman Sachs executives say is also close to Cohn, was promoted last month to be co-head of the firm’s investment-management division with Timothy O’Neill. Scherr is global head of the financing group within investment banking and also assumed responsibility for Latin America when Kevin W. Kennedy retired last year. Varadhan is global head of currencies and emerging markets.

Paradise, Ueda

Goldman Sachs named James R. Paradise, 47, and Eiji Ueda as co-heads of the trading business in Asia, according to a separate internal memo dated Jan. 10. Paradise, who’s based in London, and Ueda, based in Tokyo, will move to Hong Kong to assume some of the responsibilities previously held by Yusuf A. Alireza, who left in November after 19 years at the company.

Paradise and Ueda will report to Katsunori Sago, deputy president of Goldman Sachs Japan, and to David C. Ryan, who serves as president in Asia outside Japan, according to the memo.

Goldman Sachs may post fourth-quarter profit of 75 cents a share when it reports results on Jan. 18, Barclays Capital’s Freeman wrote in a research note last month. That would be down from $3.79 a share a year earlier and would mean the lowest annual earnings attributable to common stockholders since 1998, the year before Goldman Sachs went public, according to Freeman.

Changes Beginning

The changes at Goldman Sachs are just beginning, Freeman said in the phone interview. He pointed to still-incomplete areas of regulation such as derivatives, the so-called Volcker rule, which places limits on proprietary trading, and the adoption of the Basel Committee on Banking Supervision’s rules on capital requirements.

“As the rule sets around Volcker, derivatives and Basel get finalized over the course of the first half of this year, that frees up these firms to finally move forward in restructuring these businesses, and that may result in further headcount or management changes,” Freeman said. “You could see something broader this year or maybe next year.”

Separately, Charles Manby is retiring as global chairman of technology, media and telecommunications banking, the firm said in a memorandum to employees last month. The dealmaker, who advised companies including Deutsche Telekom AG and Vodafone Group Plc, joined Goldman Sachs’s corporate finance unit in London in 1990 before becoming a partner in 2000. A spokeswoman confirmed the contents of the document today.

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