Michael P. Regan is a Bloomberg Gadfly columnist covering equities and financial services. He has covered stocks for Bloomberg News as a columnist and editor since 2007. He previously worked for the Associated Press.

Like the rest of Wall Street, Goldman Sachs had a rough first quarter.

Smoothing Out the Edges
Even after a rough first-quarter earnings report, Goldman Sachs's shares rose on Tuesday
Source: Bloomberg

Revenue sank 40 percent and net income plunged 60 percent. No matter where you look on the income statement, it appeared as if nothing was working at the start of 2016:

Ugly Quarter
As it did at other big banks, market volatility took a toll on Goldman Sachs's first-quarter results
Source: Company presentation

Toward the end of Goldman's conference call, a familiar voice came on the line: Dick Bove, the longtime analyst who entered the securities industry in 1965. He touched on some sore spots -- not from the first quarter, however, but from most of the aftermath of the financial crisis, which has left Goldman's revenue flat and drifting lower over the past five years and cut net income to just over half of what it was in the pre-crisis glory days of 2007.

"When do you think about doing a massive merger of equals?" Bove asked. "When do you start thinking about entering new business lines, which are radically different from the ones you're in now, understanding that you can't get anything more from what you're doing other than waiting for the tide to come in?"

This would, theoretically, be a good time for Goldman to explore such a transformational merger. As Chief Financial Officer Harvey Schwartz himself described it on the conference call, when discussing the bank's prospects for a rebound in its merger advisory business: "It feels like the fundamental conditions for, I'd say, an elevated level of M&A activity, they all feel like they're still in place. And those things are challenged top line growth, slow to very moderate GDP growth globally." 

Of course, this is Wall Street in 2016, and the idea of a too-big-to-fail bank getting any bigger through a huge merger seems like a nonstarter in the current political mosh pit.  

However, there is a line of business that Goldman is dipping its toe into that indeed is "radically different" from the ones its traditionally been in. 

Just this Monday, Goldman Sachs announced that it had completed a deal to purchase $17 billion in bank deposits and an online platform from GE Capital Bank as part of General Electric's broader plan to get out of the too-big-to-fail financial-firm business. These deposits will be handled by the unit known as Goldman Sachs Bank and are more along the lines of traditional mom-and-pop retail savings accounts, not the high-net worth clients catered to by the private bank.  

Hey look, Goldman even shows up on like any other bank pitching savings accounts, with competitive rates that suggest it's looking to build deposits:  

Do I Get a Free Toaster?
Retail savers can park their money with Goldman Sachs at a deposit rate of 1.05%
Note: Sampling of rates from April 19

The firm is said to have embarked on a hiring push last year to build out an online consumer-lending service, which could be funded by deposits from Goldman Sachs Bank. It dipped another toe into the retail world last month when it agreed to buy Honest Dollar Inc., a startup offering retirement services to the self-employed. 

Naturally, this being Goldman Sachs, there were plenty of people who protested when it went after those GE deposits. The Federal Reserve Board heard from 53 commenters, with a variety of complaints ranging from issues with how GS Bank invests in low-income neighborhoods as required under the Community Reinvestment Act, to perceived coziness between Goldman and the Fed.  However, the Fed board ultimately approved the deal, and its rationale is telling: "The proposal would immediately improve the stability of GS Bank’s funding profile by diversifying sources of funding and increasing stable funding and would allow the bank to maintain and further improve its funding profile in the future. This should enhance financial stability."

So the Fed says Goldman taking on retail deposits should enhance financial stability ... you can almost hear the Occupy Wall Street drums beating again in Zuccotti Park! Naturally, this is an area where Goldman will have to tread lightly. 

Only time will tell whether the current slump in trading revenue is just a low point of the cycle or a sign of a structural shift in the business model amid the one-two punch of regulation and electronification. Either way, it makes sense for Goldman to finally embrace the moms and pops of the retail world to diversify its business and make its earnings less volatile. And given the inevitable backlash that it will incite, it makes sense for them to do it in a slow, low-key way rather than attempting a gigantic merger. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Michael P. Regan in New York at

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Daniel Niemi at