GS Goldman Sachs Group Inc

By Liz Hoffman 

Goldman Sachs Group Inc. said Monday that Co-Chief Operating Officer Harvey Schwartz will step down next month, paving the way for David Solomon to be groomed as the next chief executive of the bank.

Mr. Schwartz will retire on April 20, and Mr. Solomon will become the sole operating chief and president.

The Wall Street Journal reported last week that Lloyd Blankfein is set to retire as soon as the end of 2018 and that Messrs. Schwartz and Solomon were top contenders to succeed him.

Mr. Schwartz's announced departure Monday was a surprise, though Goldman shares didn't indicate much alarm, trading up 0.3% in morning trading.

The two men were jointly elevated 15 months ago to the firm's No. 2 post, in direct competition for one of the most-coveted jobs on Wall Street. Many on Wall Street were expecting the two to keep competing for the coveted office for weeks if not months more.

Mr. Schwartz, 53, ran Goldman's trading arm and was the firm's chief financial officer. Mr. Solomon, 56, is a hard-nosed investment banker. Neither is a lifer at the firm they've been vying to run.

The departure of Mr. Schwartz makes it likely that Goldman's next CEO won't be a trader, a sign of how much Wall Street and the firm has changed since Mr. Blankfein took over more than a decade ago. Then, trading was the unquestioned profit engine and investment banking seemed stodgy and left behind.

As growth on Wall Street has waned since the financial crisis, trading has lost much of its power. The firm has pushed into new businesses like consumer banking and low-fee index funds. Yet few believe it will ever abandon its roots as a risk-taking trading house, even as that business has struggled in recent years.

Goldman's next CEO will have to balance those forces, and will be held to account for a growth plan that Goldman wants to add $5 billion in annual revenue by 2020.

Mr. Schwartz embodies Goldman's profitable past, having followed Mr. Blankfein up the ranks of the firm's trading division. As finance chief from 2013 to 2016, he navigated the regulatory and market forces that reshaped postcrisis banking. He is well-known in Washington and is seen as a strong hand in the areas of risk-management and regulation.

Mr. Schwartz graduated high school in New Jersey with grades so poor he didn't bother applying to college, he said on a Goldman podcast last year. He eventually attended Rutgers University, bouncing at a nightclub and working other odd jobs to pay his way.

He joined Citigroup Inc. as an operations temp in 1989 and came to Goldman in 1997 as a derivatives salesman, hawking instruments that protected commodity companies from price swings.

By 2008, Mr. Schwartz was running the trading division. As the financial crisis unfolded, he kept the firm on the offensive while competitors pulled back. The gambit worked: Goldman's traders made $33 billion in 2009, the most profitable year on record for a Wall Street broker-dealer.

Mr. Schwartz was named financial chief four years later. He won over critics by overseeing an operation that largely avoided surprises that plagued other banks. Goldman hit its internal earnings projections every quarter of Mr. Schwartz's tenure. The record was scribbled on a pair of lime-green boxing gloves Mr. Schwartz keeps in his office: "18-0, all by KO."

"He sweats the details," said Kevin Ulrich, who runs investment fund Anchorage Capital. When an Anchorage portfolio company emerging from a restructuring took out a loan from Goldman a few years ago, Mr. Schwartz called Mr. Ulrich personally.

Mr. Solomon started on Wall Street in the mid-1980s, selling commercial paper at Drexel Burnham Lambert. Off duty, he played social planner to a group of college friends, organizing casino outings in Atlantic City, ski trips to Vermont and summer rentals in the Hamptons, where roommates would wake up to find him mowing the lawn.

After a stint at Bear Stearns, Mr. Solomon joined Goldman as a rare outside partner in 1999 and set about to build a high-yield debt business.

Write to Liz Hoffman at liz.hoffman@wsj.com

(END) Dow Jones Newswires

March 12, 2018 09:53 ET (13:53 GMT)

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