Comments (89)

  • Prospect in S&T - Equities
May 14, 2020

Goldman Merrill Lynch is L O A D I N G

  • Intern in IB-M&A
May 14, 2020

Goldman Fargo

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Funniest
  • VP in PE - LBOs
May 14, 2020

Prob mass suicide of WSO users

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May 14, 2020

Rumors. There was craze last year around Goldman potentially acquiring mid-market platforms too.

  • Intern in IB - Ind
May 14, 2020

UBS should acquire PJT GS; spin-off Marcus consumer division; spin-off wealth management divisions; and become ULTIMATE TOP TIER ADVISORY PRACTICE EVER

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  • Prospect in IB - Gen
May 14, 2020

I'm just a freshman so I don't know much, but Goldman would benefit a lot from a commercial bank merger because of the access to capital commercial banks have right? Wells Fargo seems like it wouldn't be the most likely candidate to be approved by the feds.

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May 15, 2020

gs is known best for being a pure investment bank, I think merging into a universal bank defeats its own reputation it built regardless if it's beneficial

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May 15, 2020

They're already moving in that direction anyway. Goldman is building a consumer bank and a commercial banking division, moving more towards a JPM/BofA kind of format than the old school GS. Less sexy but gives better LT shareholder returns.

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  • Intern in HF - Other
May 15, 2020

So this is obviously super anecdotal, but I spoke to a senior guy on the Marcus team a few days back and he seemed to tell me that GS believed that not having a legacy retail banking chain a la Chase, BofA, Citi, etc was a strength. They're aiming to be cloud-based so I would lean against Wells Fargo. I don't know much about PNC or US Bancorp but whichever is less reliant on physical locations I would favor.

That said I literally just spoke to one dude so it might be Goldman Fargo who knows.

May 16, 2020

Well I mean, yeah, the guy who's senior in the consumer digital banking division would say that about their strategy. It literally defines a digital bank.

That does not equate to a commercial / investment banking strategy. Entirely different considerations.

Most Helpful
May 16, 2020

I would say having branches offers pros and cons. But I'm not sure being wholly digital is necessarily a boon. For commercial banking customers, who generally are pretty lucrative, there's often a need to deposit physical cash and having easy access to a branch and a night depository option is important for anyone who gets paid in cash. While more and more businesses are going to cash-free lots of retailers still have significant amounts of cash. If you're an F500 you can have an armored truck pick up cash but it's not nearly as efficient for a local retailer as compared to someone like a Dollar Store which has lots of stores in relatively close proximity.

Beyond the issue of cash, there's a lot of times that a branch is useful. Ever had an issue with a stolen credit card or debit card? Many branches can freeze the old card and give you an instant issue one. Having bankers on the ground is key in small business and commercial lending to the clients banks want.

Commercial banking tends to be more relationship driven than corporate is. In corporate banking a bank can work to move up and left. What I've seen with middle market businesses is they tend to stick with their banker. In corporate banking there tends to be a lot of shared fee revenue. Everyone in the bank group for example above a certain tier will get DCM. The corporates will tend to split treasury, swaps, FX equitably based on tiering. In commercial it's much more winner take all, you might do the term loan, revolver, treasury management, swap the floating rate to fixed on the loan and handle the occasional FX trade. All the ancillary FX, treasury management and swap business is usually far more lucrative than the lending relationship although TLs can be lucrative. Generally speaking these clients require boots on the ground because BoA, Wells, JPM, US Bank, PNC and a host of local, regional and super regional banks with bankers in the area will be calling on them.

In addition branches tend to correlate fairly well with a banks assets, yes there are a handful of banks with few branches e.g. BNY, but take a look at BoA, Wells, JPM and then compare them to regional banks, generally speaking the big players have more. Citi has fewer branches, but historically served more large corporate depositors who tend to be larger, although as I alluded to in another post that money tends to move faster.

The downsides of owning branches comes in the cost of both having to pay for the space and then to staff it. Good branch locales are generally not cheap given that they will generally be located in a given areas commercial hub. Branch staff isn't as cheap as they used to be either. Some of the branch networks especially of the largest banks were duplicative and they've had marginal branches pile up over the years and now they're needing to trim.

In summary I think that a strong branch network right now is important to supporting commercial banking activities, but as cash usage declines and people become increasingly comfortable with the idea of a digital bank it's harder to say that it will be the case in ten or fifteen years. Digital banking has been around since the internet bubble and there has been partial acceptance like viewing accounts online or in an app. Quicken and other non banks have been able to do a good job with digitizing certain aspects of traditional banking. Yet branches still persist.

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May 14, 2020

At least for the Wells Fargo rumors that were circling today, there are a couple pretty clear legal barriers that would block the merger (mainly the Riegle-Neal 10% deposit cap applicable to all mergers, but also the asset cap that was specifically placed on Wells Fargo as a punishment for its past legal troubles).

I guess anything is possible, but I definitely wouldn't put my money on it.

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May 14, 2020

I just came to say nice username

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May 14, 2020

Wow long lost brother?

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May 14, 2020

See kids, this right here is how you fuckin' bank.

Read a research report and toss it off the cuff

Midwestern mid-cap CFOs: swooooon.

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  • Summer Associate in IB - Ind
May 14, 2020

Regulators would never let it happen. Not sure where the rumors started but the price action in WFC the past few days shows that nobody thinks it's gonna happen.

  • Intern in IB-M&A
May 14, 2020

GS is definitely looking around for an acquisition. They apparently were in the final rounds of bidding for Greentech Capital Advisors this January, but then Nomura ended up outbidding them.

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May 15, 2020
Intern in IB-M&A:

GS is definitely looking around for an acquisition. They apparently were in the final rounds of bidding for Greentech Capital Advisors this January, but then Nomura ended up outbidding them.

I know there was a lot of smoke around GS trying to acquire William Blair, maybe last year/18 months ago. I didn't know how serious their efforts were or are.

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May 15, 2020

I thought it was Harris Williams?

  • Intern in IB - Ind
May 14, 2020

Finally, Royal Sacks of Canadian Goldman will become a reality. RBC can finally be a bulge bracket.
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Now we wait...

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May 14, 2020

funny intern

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  • Intern in IB - Ind
May 20, 2020

This costs my sleep.

  • Intern in IB-M&A
May 14, 2020

Is this a W for GS?

  • Associate 1 in IB - Ind
May 14, 2020

RBC acquires GS?

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May 15, 2020

Now GS can learn how to become a real BB

May 15, 2020

GS should acquire Tobin & Co so it can dominate Large cap M&A all the way to LMM M&A

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  • Analyst 2 in IB-M&A
May 15, 2020

Yeah definitely, Tobin & Co. will finally let GS break into the large cap space

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May 15, 2020

GS merging with Tobin and Co? Ignoring the fact that the regulators would never this happen, this could be a really good deal. What would the final name be? Tobin & Goldman? Or Goldman & Tobin?

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  • Prospect in IB-M&A
May 15, 2020

I always thought the most important name went first so Tobin & Goldman.

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May 15, 2020

It'll still be Tobin and Co., Goldman is now a part of the company

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May 15, 2020
Patagucci Vests:

GS should acquire Tobin & Co so it can dominate Large cap M&A all the way to LMM M&A

Since when is Tobin & Co doing LMM M&A? All I see are some pathetic multifamily cap raises

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May 15, 2020

Tobin, Goldman, Sachs & Co. has a nice ring to it.

Controversial
May 15, 2020

I'll do you a favor and let you in on a little secret--Fox is basically not a news service these days. Fox was created a couple decades ago and stopped attempting to be serious in half that time. Do yourself a favor--don't cite Fox for anything if you wish to be taken seriously.

Along those lines--why would Goldman wish to merge with a retail or commercial bank? Wells might wish to bolster its investment banking practice, but Goldman doesn't wish to become a true bank holding company.

Instead of me explaining why Goldman has little interest in becoming JPMorgan, why don't you explain to me why you think that incentive exists, and I'll see if your arguments hold any weight?

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May 15, 2020

While I think a merger unlikely, the most probable reason GS or MS or any standalone investment bank would consider merging with a commercial bank is cost of funds.

A buddy at a standalone BB bitched and moaned about how it was impossible to hit hurdles for IG loans. With the increasing importance of syndicated facilities over the last few decades getting access to cheap capital is increasingly important especially for facilities like revolvers. Remember that while RCFs have tiny returns, they require a commitment of bank capital and that's much more fear to GS than it is to BoA, Wells, JPM or evening Citi.

The whole Marcus platform is an attempt to lower the cost of capital. Deposits particularly consumer check and savings are generally way cheaper than going and issuing debt.

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  • Assist. VP in CorpStrat
May 15, 2020
guyfromct:

While I think a merger unlikely, the most probable reason GS or MS or any standalone investment bank would consider merging with a commercial bank is cost of funds.

A buddy at a standalone BB bitched and moaned about how it was impossible to hit hurdles for IG loans. With the increasing importance of syndicated facilities over the last few decades getting access to cheap capital is increasingly important especially for facilities like revolvers. Remember that while RCFs have tiny returns, they require a commitment of bank capital and that's much more fear to GS than it is to BoA, Wells, JPM or evening Citi.

The whole Marcus platform is an attempt to lower the cost of capital. Deposits particularly consumer check and savings are generally way cheaper than going and issuing debt.

I don't know much about RCFs but if it works like other balance sheet lending I think they're more likely to look for so-called wholesale funding than issuing debt (although we may be referring to the same thing just with different terminology). I'm guessing they see that the cost of wholesale is as low as it can go now and the future is only upwards aka margins getting squeezed to hell if they can't make a step-wise increase in % funding from core deposits. Core deposits are definitely the game right now though... I heard through reliable sources they were competing to acquire E-Trade. Do they think that Marcus isn't enough to make further in-roads in the consumer market?

I wonder what this means for GS management's view of the advisory business's future. I'm not as familiar with the P&L narratives for advisory though.

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May 15, 2020

B/c the old Oracle of Omaha is a large shareholder of GS and the largest of WFC and he needs to do some crazy shit now to make up for his airline and Oxy investments to save face.

May 15, 2020

yeah everyone knows how prone buffet is to making rash decisions in order to boost short term stock price

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May 16, 2020

Along those lines--why would Goldman wish to merge with a retail or commercial bank? Wells might wish to bolster its investment banking practice, but Goldman doesn't wish to become a true bank holding company.

Lol, there's numerous strategic advantages to commercial and retail banking arms / balance sheets. I love the palpable fear that you'll have your IB brand degraded by dirty, unwashed Non-IB banking. I thought this kind of sentiment passed its peak a decade ago.

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May 16, 2020

In addition the pure play IBs are active in corporate lending and a number converted to bank holding companies back in '08. Marcus is GS's attempt to have a retail bank.

May 16, 2020
leltec:

I love the palpable fear that you'll have your IB brand degraded by dirty, unwashed Non-IB banking. I thought this kind of sentiment passed its peak a decade ago.

Probably not within GS's partnership. I haven't worked there for nearly 20 years, but the partnership culture remains strong with a high opinion of themselves.

May 16, 2020

I get that people are conservative/lean republican on WSO, but come on brotherbear is right - Fox News is utter horseshit.

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May 16, 2020

They all suck, but where there's smoke there's fire on this one.

May 17, 2020

deleted

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May 17, 2020

Work from home taking its toll huh?

May 15, 2020

Goldman loves Anacott Steel.

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May 15, 2020

Unlikely that Wells and GS would ever merge. PNC and US Bancorp would be more likely but still doubtful tbh. It would have to be fore retail and commercial banking purposes. Marcus competes directly with PNC's online banking platform, so if they want to remove a competitor than maybe but cant see it being worth it, even though PNC is a good bank.

May 15, 2020

PNC sold its stake in BlackRock this week for 14.4 billion. Will be interesting to see how they use it in the next quarters. In 2008, they acquired National City for 7 billion below tangible book value.

Array

May 15, 2020

Damn did not know that. Thats some serious capital to move around.

May 15, 2020

Heard GS wasgoing to buy FT Partners at some point. Would have been a good comeback since the firm is still held to its old GS standards and ways.

Will update my computer soon and leave Incognito so I will disappear forever. How did I achieve Neanderthal by trolling? Some people are after me so need to close account for safety.

  • Intern in IB-M&A
May 15, 2020

Mate, im really curious. Why are you always talking about FT partners lol Do you work there or something?

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May 15, 2020

Oh, I don't mean to mention them THAT much. I had heard rumors since this is a rumors thread.

Someone just told me that and they didn' tseem to be mentioned.

Will update my computer soon and leave Incognito so I will disappear forever. How did I achieve Neanderthal by trolling? Some people are after me so need to close account for safety.

  • Intern in Other
May 15, 2020

I can see it now: Goldman, Tobin, and Sachs

May 16, 2020

It is obvious that they want to overtake RBC to remain the top shop on the street...

"If it is on WSO, it must be true" ~ old Jewish proverb.

May 16, 2020

Hard to imagine how this would pass regulatory hurdles, both in terms of the asset cap on Wells and in terms of US deposit share - a Goldman-Wells merger would put the combined entity well over both limits.

Goldman has had retail and commercial banking capabilities on its agenda for years now (through Marcus and other investments), so the idea of acquiring a traditional bank makes sense in itself. There are lots of potential benefits, from access to a larger and MUCH cheaper source of funding, to synergies on the corporate side, where Goldman can leverage its relationships to offer high-margin fee-based treasury/cash management services. The supposed target is very surprising, though, unless they manage to accomplish some sort of regulatory finagling.

Array

May 16, 2020

Makes a ton of sense. The financial services advisory industry has been drying up ever since the 90s and has finally hit the point where Investment Banking is no longer a long term super profitable business model for banks. Deals have been decreasing, competition has thoroughly increased from elite boutiques as well as companies wising up and realizing they don't need an investment bank to guide them through an IPO process (eg spotify) or companies don't want to raise outside capital since investors are a pain in the ass for a CEO to deal with or that investors are now cutting out banks out of the deal process and going straight to companies or vice versa to start a deal process going. If we look at the business model of banks and the financial services industry from the 90s and on. Originally in the 90s Sales and Trading was the crown jewel for Bank's profits, especially when there was no separation between institutional clients and retail clients for S&T. Not only that because the technology at the time was limited, Banks' literally controlled the securities market since all information flowed through them, thus giving them ability to make markets as they pleased, allowing them to make enormous profits. As time went on and through multiple scandals and crashes along with technological innovation, S&T died rapidly and stopped being the money maker for banks. Then came Corporate Finance which will never really fade away since companies always need money, however that's begun to fade as well less companies are going to advisors and are just figuring out how to get funds through their lawyers and accountants. During this time what ended up happening is that the CEO of these banks' realized that the corporate banking activities are losing money and their role as CEO is to make sure the banks remain profitable since they have shareholders they have to answer to. So the solution to this problem? Create new products and services to consumers. It's a hell of a lot more profitable to have thousands and millions of consumer/retail customers they can provide easy fast services too and charge small fees that add up quick than to provide long uncertain big reward corporate and institutional services. So thus the bulge bracket banks are moving over to services consumer/retail customers. Morgan Stanely has been doing this since James Gorman became CEO and has been aggressively acquiring as many Wealth Management companies as they can since the profitability and sustainability of those businesses are far better than corporate finance/S&T models will ever be.

Goldman Sachs for the past couple years has actually trying to slowly shift away from their image as an investment bank by trying to label themselves as a technology company. We've seen this through their actions with Apple trying to get Apple card going because consumer banking makes far more money than corporate banking ever will. David Solomon isn't a fool and he won't be afraid to lay off a bunch of IB and S&T employees to replace them with a bunch of engineers and retail wealth managers. I also wouldn't be

tl;dr Corporate finance is no longer a profitable business model and GS is trying to cash in on retail/consumer banking since it is far more sustainable and profitable than IB or S&T will ever be.

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  • Prospect in IB-M&A
May 17, 2020

I'm really hoping they buy CVP so I can get a Centerview of Sachs. Or maybe a Golden View of Sachs? Either way, I want to see some testicles front-and-center.

May 17, 2020

There have been rumors about Goldman shopping for awhile (2 years now). Each of these banks has been mentioned every time I have heard these rumors. They still haven't pulled the trigger. I can't imagine the price has come down enough to make it worthwhile, but I guess it's possible.

WFC is a giant bite. I think they're going to go after IBKR just to counter MS's acquisition of ETFC.

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May 19, 2020
Comment
May 21, 2020