Receiving Wide Coverage ...
Confirmed: As expected, Goldman Sachs named David Solomon and Harvey Schwartz as presidents and co-COOs to replace Gary Cohn, who is leaving to join the Trump administration. The naming of two co-presidents to replace Cohn "raises questions about the structure and strategic direction of the company," the Financial Times says, and suggests "a return to a traditional structure that pits an executive from the trading side of the business against one from investment banking." While the New York Times suggests it's "a new generation."
Yet, if Wall Street history is any guide, the FT says, being named co-president "is hardly a guarantee that either man will succeed Lloyd Blankfein as the bank's chief executive," the FT says in a separate article. "The job of president — a No. 2 person in corporate parlance — has proved to be something of a poisoned chalice in the dog-eat-dog world of Wall Street, where heirs apparent have a funny way of falling out of favor with their bosses."
Martin Chavez, who runs technology at Goldman, was named deputy CFO and will replace Schwartz as CFO next April. Goldman's decision to promote Chavez, a former software entrepreneur, "is a sign of the growing importance of technology to the 147-year-old bank," says the FT, noting the unit "employs about 11,000 engineers — almost one-third of its total headcount."
Goldman is also moving more of its investment bankers outside of New York, shifting them to places like Dallas and Atlanta. "The idea is to have bankers better situated to call on companies based far from Wall Street," the Wall Street Journal reports. "The move will ease Goldman's reliance on hyper-specialized, industry-focused bankers in New York." But there's a risk to the strategy: "Some bankers may view such moves as banishment."
Not done yet: The Journal's Heard on the Street column says financial stocks still have a way to run even after their sharp rise since Donald Trump's election. "Rising long-term market rates, and increases by the Federal Reserve on short-term rates, are both helpful to financials at this stage," the column notes. "The Fed's rate increase announced Wednesday will allow banks to charge more for certain loans almost immediately. But since these lenders are flush with deposits, they will be slow to lift the rates they pay for them, if they do at all."
Indeed, "banks generally don't rush to increase deposit rates, allowing them to pocket the higher spread, or difference, between what they earn on loans and what they pay to customers," a separate Journal article notes. "Deposit rates especially lag behind in the first year of a period of rising rates." But the banks sure aren't slow to raise borrowing rates. Several banks, including Bank of America, JPMorgan Chase and U.S. Bancorp all raised their prime lending rates on Wednesday.
Wall Street Journal
Dissatisfied: More than a fifth of home buyers say they are sorry they chose their mortgage lender while nearly three out of 10 first-time home buyers regret their choice of lender, according to J.D. Power's annual mortgage origination study. The biggest sources of dissatisfaction among the first group: lack of communication, unmet promises and other problems with the lender. Many first-time buyers said they felt pressured to choose a particular loan product. Quicken Loans, CitiMortgage and Ditech Financial ranked highest in customer satisfaction.
Nabbed: An American citizen living in Moscow was arrested Wednesday after he flew to the U.S. to face charges he hacked into and stole customer data from 100 million customer bank accounts, including 83 million from JPMorgan Chase. The man, Joshua Samuel Aaron was arrested at Kennedy Airport and pleaded not guilty to a 22-count indictment. His lawyer said Aaron voluntarily returned to the U.S. "to responsibly address the charges."
Quotable ...
"They are either too much of a threat or not a threat and either scenario poses issues. If they are too much of a threat, the CEO may feel vulnerable. When they are not enough of a threat, the No. 2 person would be deemed not ready." — Michael Mayo, banking analyst at CLSA, discussing possible succession scenarios at Goldman Sachs
