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FT: Goldman's Blankfein Hints Bank May Split CEO Roles One Day

Image: FT: Goldman's Blankfein Hints Bank May Split CEO Roles One Day
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By    |   Friday, 01 December 2017 04:42 PM

Lloyd Blankfein, chairman and CEO of Goldman Sachs, has discussed the possibility that he may be succeeded by a pair of co-chief executives. That would be a break from the managerial structure the bank has had for the past 18 years, the Financial Times reported.

While Blankflein hasn’t announced imminent plans to retire, he said in an interview with Bloomberg TV that the bank would not necessarily name only one person to succeed him when he steps down.

Replacing him is a closely watched process with its own kind of Kremlinology. The bank last December appointed two senior executives from the banking and trading businesses to replace Gary Cohn, the former president and chief operating officer who joined the Trump administration as the top economic adviser.

The bank has its critics, especially since Goldman stock is down 6 percent year to date, making it one of the worst performers in the Dow Jones Industrial Average. The market benchmark is up 23 percent on the strength of Apple, Boeing, Caterpillar, McDonald’s, UnitedHealth and Visa.

“The current management team is not doing the job,” Dick Bove, analyst at Vertical Group, said.

Replacing Blankfein with two people may mean that Harvey Schwartz and David Solomon, the co-presidents and co-chief operating officers, would return the bank to a structure it had before going public in 1999. Other contenders include Stephen Scherr, head of Goldman’s fast-growing consumer banking arm, and chief financial officer Marty Chavez, the FT said.

“Goldman Sachs as a firm has a long tradition of co-CEOs,” Blankfein said in response to a question on succession. “That can work if it works and people get along, but it doesn’t necessarily have to work. So I would say that it’s not a guarantee.”

Planning a successor to Blankfein has grown more urgent as the company has lagged at a time when everything should be going well for Wall Street banks. Trump promised a business-friendly administration that would reduce regulation, cut corporate taxes and push U.S. economic engines into overdrive.

Goldman’s last co-CEOs were Jon Corzine and Hank Paulson. Corzine stepped down in early 1999, shortly before the firm went public after being a partnership for more than a century. Paulson, the sole chief executive until 2006, then served as Treasury secretary in the George W. Bush administration.

Bove doesn't foresee improvement for Goldman.

"[I would] buy Bank of America and short Goldman Sachs," he told CNBC last week.

"Bank of American is phenomenally good. ... If we take a look at the growth of money supply [that we assume is at 6 percent] over the next four or five years and Bank of America deposits grow along with money supply, this means one out of every $9 in growth of money supply winds up in Bank of America," he said.

"And then we take a look at the growth in GDP, which let's say is 5.5 percent on trend, and that means Bank of America gets one out of every $20 in terms of loans."

However, Bove warns Goldman faces a volatile future.

"Goldman Sachs earnings are now down from where they were 10 years ago," said Bove. "They're down below what they were five years ago, they're down below what they were last year, and I assume they're going to be down below where they were in the last quarter."

Bove thinks Goldman management, particularly Blankfein, hinders the bank's growth.

"The net effect is this is a company which has this mystique, which is: it doesn't matter where they earn money, as long as they pay their executives a lot," he said. "If they do that, then people want to buy the stock."

"But the fact is there needs to be a sweeping change at the top of this company, including a change in the CEO because it doesn't make money, it doesn't make money on an incremental basis," he added.

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Lloyd Blankfein, chairman and CEO of Goldman Sachs, has discussed the possibility that he may be succeeded by a pair of co-chief executives.
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Friday, 01 December 2017 04:42 PM
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