Goldman Sachs Group Inc named David Solomon as its next chief executive officer on Tuesday, ushering in a new era for the Wall Street bank as it expands into different businesses and revamps familiar ones.
Solomon's promotion from his current role as president and chief operating officer comes months after the 56-year-old investment banker was first reported as next in line to succeed longtime CEO Lloyd Blankfein. His first day in charge is October 1.
"David is the right person to lead Goldman Sachs," Blankfein said in a statement. "He has demonstrated a proven ability to build and grow businesses, identified creative ways to enhance our culture and has put clients at the center of our strategy. Through the talent of our people and the quality of our client franchise, Goldman Sachs is poised to realize the next stage of growth."
The change comes at a turning point for Goldman Sachs, which is trying to generate another $5 billion in annual revenue by growing its fledgling consumer bank, squeezing more from businesses like asset management and changing the way it approaches trading.
Management detailed parts of that plan last September after years of insisting that Goldman's once-lucrative trading business would come roaring back to life when markets picked up. Instead, since 2009, Goldman's annual trading revenue has declined by $20.8 billion.
Unlike Blankfein, who rose through the trading ranks to become CEO, Solomon made a name for himself advising corporations on financing and strategy in Goldman's investment bank. He joined as a partner in 1999 after working in commercial paper, junk bonds and leveraged finance at firms including Salomon Brothers, Drexel Burnham Lambert and Bear Stearns.
Alan Schwartz, executive chairman at Guggenheim Partners who worked with Solomon at Bear in the 1990s, said he showed natural leadership qualities early in his career.
"David is a very good big picture thinker while at the same time staying on top of all the details," Schwartz said. "Finding both in one individual is unusual."
Several Goldman bankers who spoke to Reuters said employees in the business have been celebrating Solomon's triumph in a long succession race.
Though he was considered a "dark horse" candidate years ago, Solomon managed to outlast a number of rivals, including several from the trading business. Among them are former longtime chief operating officer Gary Cohn, who left Goldman last year for a role in President Donald Trump's White House that he has since departed, and former co-chief operating officer Harvey Schwartz, who left the bank in April after Solomon was chosen as Blankfein's successor.
Through most of its history, Goldman has alternated between traders and bankers as CEOs. There is natural tension between the two sides of the house at most Wall Street banks, especially after the trading losses and scandals that stemmed from the 2007-2009 financial crisis.
Nonetheless, Solomon will have to get traders and bankers to cooperate on the revenue growth plan, which depends partly on the idea that customers should rely on Goldman Sachs not just for merger advice or stock offerings, but for all their borrowing, trading and money management needs.
News of Solomon's appointment came on the same day Goldman reported second-quarter results, which showed a 44 percent profit rise.
Beyond revenue growth, Solomon's legacy will depend on whether he can fill Blankfein's shoes.
The 63-year-old Blankfein, who took the helm in June 2006, oversaw Goldman Sachs through its most difficult period in modern history, involving a taxpayer bailout during the financial crisis, protests over Goldman's role in the crisis and massive regulatory changes that curtailed some of its most lucrative businesses.
Blankfein resisted pressure to leave during some of those moments, saying there was no better job to have. But in more recent years, he has joked that he does not want to die on the job like one of his predecessors, Gus Levy, who suffered a fatal stroke at a meeting.
He is stepping away at a time when Goldman Sachs is on steadier footing, but needs fresh leadership to reinvent itself, said Marty Mosby, a bank analyst at Vining Sparks.
"That is what David Solomon's challenge is," said Mosby. "That is why they're changing the management team."