Goldman Sachs Group Inc (NYSE:GS) Gets Creative on Declining Trading Revenues

October 13, 2017, 10:54 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Goldman Sachs Group Inc (NYSE:GS) recently announced that it was creating an Innovation Lab whose main responsibility is to pitch investment ideas to large institutional investors. The new unit shall focus on pitching ideas to institutions such as Warren Buffett’s Berkshire Hathaway and Japan’s SoftBank Group Corp, which have billions of investment capital.

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Article Summary

GS has created a new ‘Innovation Lab’

The bank’s trading revenues have declined substantially.

GS has acquired mortgage lender Genesis Capital.

The bank is investing in technology.

Here’s the trading report for GS

The investment bank has been forced to become innovative in efforts to generate more revenues even as its core trading revenue is declining. The innovation Lab will be led by Brian DeCenzo and James Morris who are tasked with generating out of the box ideas different from the normal mergers & acquisition deals in order to attract large investors.

Goldman Sachs faces stiff competition in its traditional markets from other domestic investment banks such as JPMorgan Chase & Co. (NYSE:JPM) and Morgan Stanley (NYSE:MS). The bank is currently suffering from the regulations instituted after the financial crisis, which led to the investment bank’s revenue falling by $18 billion on an annual basis since 2009.

The bank has also dipped its toes into acquisitions and consumer lending in efforts to boost its revenues. The bank is set to acquire Genesis Capital, which was founded in 2007, and lends to investors looking to buy, renovate and sell single-family homes. Genesis lent out $1 billion last year and might be a good addition to Goldman Sachs.

Goldman Sachs is also rumored to be in the process of developing a trading platform for cryptocurrencies such as bitcoin. Although these rumors have not been confirmed, it is clear that the bank is not stopping in its efforts to create new revenue streams away from its traditional trading revenue stream.

The investment bank is also looking to cash in on the booming technology industry given that it is currently hiring more partners with technology backgrounds. The bank’s technology and engineering unit headed by Elisha Wiesel recently hired Jeff Wecker as its chief data officer even as the bank explores ways of monetizing the massive amounts of data it collects.

It is evident from Goldman’s recent hires such as Michael Blum who oversees electronic-trading technology that the bank wants to cash in on many of the new technologies currently being developed in Silicon Valley and across the world.

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