HONG KONG: Goldman Sachs Group Inc plans to add about half a dozen senior bankers over the next six months or so and invest more in Asia using its balance sheet as the Wall Street firm seeks to switch to a growth mode in investment banking, a top executive said.
After years of squeezing costs with lower headcount, tighter compensation and retrenchment from some segments in investment banking following the global financial crisis, Goldman is ready to change tack, said Gregg Lemkau, who was named co-head at its investment banking division in May.
"The mindset we're taking on is one of a shift towards growth," Lemkau said in one of his first media interviews since assuming the new post, during a trip through Asia.
"We've probably squeezed about as much as we can out of the business and as we look ahead, we see an opportunity to invest in growth to try to drive the business forward." Investment banking accounted for about 22 percent of Goldman's half-year 2017 revenue.
Goldman's shift to a growth focus in investment banking, which has not been detailed before, comes amid a weak performance in its core bond-trading unit, and an expected rollback of onerous regulations for banks under the administration of U.S. President Donald Trump.
The New York-based firm hired Credit Suisse veteran Jeff Douthit in June, naming him a partner and head of global business and consumer services.
It could add another two or three more senior hires by the end of the year and another two or three in early 2018, Lemkau said.
"The initial focus is on a handful of strategic hires globally to try and really grow the top line and drive the business," he added. "We're not going to start adding aggressively… but we would like to strategically and selectively enhance the team."
The company has hired about 25 people, mostly junior bankers, over the past nine months to one year in Japan, Australia and other countries in Asia, betting GDP growth in China and other emerging economies will drive its investment banking revenue.
It plans to add more senior staff in China, after it hired China-focused banker Bill Chu to its investment banking team in the country in July.
"The strategic priorities have been on building out the regional footprint with a particular focus on China," Lemkau said. "The growth in China, even in a more subdued GDP environment, is still much more significant than anything else we see globally."
Goldman also plans to broaden and deepen coverage of companies, including unlisted ones, to tap investment banking opportunities in debt financing, equity issuance or merger and acquisitions (M&A) advice, he added.
The bank, an early backer of tech companies including Uber Technologies Inc and music streaming service Spotify, could also increase equity investments through its merchant banking business, especially in Asia.
"If you look at our business opportunity globally, investment banking fees in Asia aren't as large as they are in the U.S. or Europe, so the ability to create potential upside through principal investing is even greater," Lemkau said, declining to specify potential deals.
He said U.S. M&A activity is expected to rebound in the coming months as companies scout new opportunities. Deals have declined in the aftermath of Trump's election due to uncertainty about his tax reform and deregulation agenda.
The consumer sector, as well as technology, media and telecommunications (TMT) could lead the rebound in deals, Lemkau said.
"You can envision the largest eight cable, telecom, wireless companies in the U.S. becoming three in the next few years. Any one of those would be a mega transaction. That's a place where there's a lot of expected activity and strategic positioning," he said.