By Liz Hoffman
Goldman Sachs Group Inc. is shaking up the leadership of its
powerful trading arm, which was once the envy of Wall Street but
has struggled in recent years.
Pablo Salame and Isabelle Ealet, two of three executives who
oversee the division, will leave the firm next month, according to
an internal memo reviewed by The Wall Street Journal.
Monday's shake-up leaves Ashok Varadhan as the sole head of the
division and could tee up an effective split of the firm's
fixed-income and equities arms, an idea that has gotten some
discussion among executives, according to people familiar with the
matter.
The two executives couldn't be reached for comment.
Goldman's securities division employs thousands of traders, who
manage positions in assets ranging from blue-chip stocks to global
currencies, and salespeople, who pitch the firm's products and
investment ideas to clients.
The business has struggled to regain its footing since the
financial crisis, leading Goldman to branch out into other areas
such as consumer banking and asset management.
New regulations have crimped trading profits and a long period
of market calm has sapped demand for the complex products that are
Goldman's specialty.
The division made $12 billion last year, down 18% from 2016 and
just one-third of its revenue in 2009, when it pounced on
retreating rivals to post its most profitable year on record.
The fixed-income and equities businesses have been jointly
managed since the early 2000s, though power has tended to rest with
executives from fixed income, a onetime profit machine that
launched the career of Goldman's chief executive, Lloyd Blankfein.
Messrs. Salame and Varadhan and Ms. Ealet each got their starts
there, too.
The departures thin the ranks of experienced trading executives
at a time when David Solomon, an investment banker, is poised to
succeed Mr. Blankfein as CEO. Mr. Solomon's rival for the top job,
Harvey Schwartz, had previously run the trading business and was
seen as a skilled risk manager.
Top executives weighed a shake-up of the trading division's
leadership late last year, a person familiar with the matter said
at the time. They sought to balance the need for a steady hand atop
the unit -- which is a minefield of risk, even years after the
financial crisis -- with the hope that changes would boost morale
and show clients and shareholders that Goldman was taking its slump
seriously.
They opted instead for a smaller reorganization lower down the
ranks, promoting Justin Gmelich and Jim Esposito to be co-chief
operating officers of the fixed-income unit. That replicated a
chain of command already in place in Goldman's stock-trading arm.
Those two men will remain in their roles, as will equities co-COOs
Michael Daffey and Paul Russo, according to Monday's memo.
Mr. Salame, a 52-year-old Ecuador native, is a powerful presence
inside Goldman, sitting on the committee that selects new partners.
Brainy and blunt, he is known more for his intellectual horsepower
and guru-style beard than his rapport with clients, though he
spearheaded a customer charm offensive last year designed to
showcase a friendlier Goldman.
He joined the firm's New York office in 1996 in emerging-markets
trading and made partner in 2000. Mr. Salame has held his current
job since 2008. He was considered for the role of chief financial
officer in 2013 but declined, according to people familiar with the
matter.
Ms. Ealet, French-born and based in London, joined Goldman in
1991 as a commodities trader and later ran that business. A partner
since 2000, she is the only woman running a major division at
Goldman but has kept a low profile, both inside and outside the
firm. Ms. Ealet was awarded the French government's highest
civilian honor in 2015.
The firm's commodities arm, which is viewed as being in Ms.
Ealet's domain, struggled acutely last year, l osing money on
natural gas and power bets. Goldman's head of commodities, Greg
Agran, left last year.
Mr. Varadhan remains for now atop the securities division,
though Monday's memo listed five other executives who will jointly
oversee the day-to-day operations of the unit.
He rose as a superstar swaps trader and became one of the
youngest partners in Goldman history, at age 29. He was among the
firm's highest-paid employees in the 2000s trading boom, in some
years outearning Mr. Blankfein, his then neighbor at 15 Central
Park West.
Mr. Varadhan eventually oversaw trading of interest rates,
currencies and emerging-market debt and became a division head in
2014. A year later, he was transferred to London, a move at Goldman
that is meant to round out future leaders of the firm.
But his star had dimmed in recent years, according to people
familiar with the matter. The "macro" trading businesses he is most
closely associated with struggled, and at times he struck
colleagues and clients as less attentive and enthusiastic.
Last year, Mr. Varadhan considered taking a job with hedge-fund
firm Millennium Management, a major Goldman client, people familiar
with the matter said. The talks didn't ultimately lead to a job,
but they became known inside Goldman, raising questions internally
about his commitment to the firm, the people added.
Write to Liz Hoffman at liz.hoffman@wsj.com
(END) Dow Jones Newswires
May 14, 2018 17:58 ET (21:58 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Goldman Sachs (NYSE:GS)
Historical Stock Chart
From Mar 2024 to Apr 2024
Goldman Sachs (NYSE:GS)
Historical Stock Chart
From Apr 2023 to Apr 2024