At Goldman, Time to Fill in the Blankfein

Questions remain as to whether the bank has done enough under the CEO's leadership to adjust to a post-crisis world.
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Photographer: Misha Friedman/Bloomberg
At Closing, March 21nd
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Goldman Sachs Group Inc. CEO Lloyd Blankfein has described his role as the "best job in the world." Amid a report he is preparing to relinquish the position, investors can be grateful for his service, but at the same time, welcome a new era. 

The Wall Street Journal reported Friday that the 63 year-old, who took over from Hank Paulson in 2006, is set to end his tenure as soon as this year. Blankfein responded via Twitter, saying the announcement was "the WSJ's ... not mine." Still, assuming there is truth to the news, it's worth taking a look at his legacy. 

Blankfein can be proud of a lot: Under his leadership, Goldman Sachs not only weathered the financial crisis, but emerged relatively unscathed. Since then, the Wall Street bank has managed to thrive despite the introduction of extensive post-crisis regulation (some of which it has been slow to adopt, perhaps intentionally). 

Report Card

In the Lloyd Blankfein era, Goldman Sachs has outperformed most bank peers but hasn't kept pace with the broader market

Source: Bloomberg

The question remains, though, whether Goldman Sachs has done enough under Blankfein's leadership to adjust to a post-crisis world and move beyond its longtime focus on investment banking and trading. A shift is underway, but there is room for more innovation. 

Not Too Shabby

While the timing remains unclear, Lloyd Blankfein is poised to leave Goldman investors in pretty good shape. Still, Jamie Dimon maintains an edge.

Source: Bloomberg

Currently, Goldman Sachs is muscling into consumer banking and bolstering its efforts in areas such as corporate lending as a means to drive growth amid a slump in trading. Arguably, decisions to tackle Main Street and broaden its wealth-management businesses should have been made sooner. And while core businesses such as investment banking and investing have remained strong, Blankfein's successor -- likely one of two co-presidents, Harvey Schwartz or David Solomon -- will need to usher in fresh ideas to make sure the firm is increasingly diversified, especially when the next downturn comes. 

New Ceiling

Goldman's profitability is set to improve in coming years thanks in part to tax cuts and factors ouside Blankfein's control. Even so, we won't see a return to the pre-crisis heights in the early days of his rein.

Source: Bloomberg, Barclays estimates for 2018 and 2019

Importantly, Blankfein's exit gives Goldman Sachs's board an opportunity, and one it should seize, to strengthen its corporate governance by naming him non-executive chairman or at least giving that role to someone who isn't his successor as CEO. Like JPMorgan Chase & Co.'s Jamie Dimon, Morgan Stanley's James Gorman and Bank of America Corp.'s Brian Moynihan, Blankfein holds the joint roles of chairman and CEO, a feature that shareholders across Wall Street have increasingly attempted to abolish. 1

Goldman Sachs's board debated making that change back in 2006 but ultimately handed control to Blankfein. Twelve years later, in a different world, I'd expect a different outcome. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
  1. Citigroup and Wells Fargo have split the CEO-chairman roles. 

To contact the author of this story:
Gillian Tan in New York at

To contact the editor responsible for this story:
Beth Williams at

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