As Goldman Sachs reported its first-quarter results earlier in the week, the firm also revealed a few details about its much-talked-about operational overhaul.
The company attempted to explain to its investors the various strategic changes it was going to make to improve the company's standing. However, most were still focused on the recent revenue declines, which has affected almost all of its main businesses.
During its discussion with investors, the fifth largest bank in the world explained that it was already laying the groundwork to increase its retail deposits by as much as US$10 billion a year. The company also revealed its plans to shift most of its business into baking units to further lower funding costs.
To that very same end, Goldman Sachs executives explained that they will be getting rid of costly assets such as those using older technologies and shifting staff to more cost-effective hubs. The company expects that it should be able to save a significant amount of money through its new strategy, which should improve returns on shareholder equity.
Executives had also proudly explained to investors that its efforts to slash the firm's risk-weighted assets in its fixed-income business have been quite successful. Since 2013, the firm has reportedly slashed more than 40 percent of its risk-weighted assets. The exact amount was unfortunately not disclosed, but the assets were mainly comprised of the firm's long-dated derivatives, which required a lot of capital.
Despite its detailed strategy outline, some investors were still unimpressed given the challenges that the company's faces throughout its planned revamp. During the discussion of the company's quarterly results, investors questioned the company's ongoing revenue slump and its increasing technology spending budget.
In the past, Goldman Sachs had operated in secrecy, rarely disclosing its core operations and strategy to investors. This practice had generally been tolerated given the firm's performance and its ability to generate higher returns when compared to its competitors. However, that has now apparently changed in light of new regulations and the changing market trends. The bank has so far promised to disclose more details about its progress and operations to investors moving forward.
So far, the bank's overhaul has yet to show results as it experiences drops in its various business, which includes trading, investment management, underwriting, and lending. The slump in its various units has resulted in an overall 13 percent drop in its first-quarter revenues. The bank reported total revenues of US$8.81 billion, which was below the forecasted US$8.99 billion. Following its earnings report, Goldman Sachs shares dropped by 3.1 percent to US$201.28.
