After weeks of stressful negotiations, Massimo della Ragione and Diego de Giorgi, both high-flying partners at Goldman Sachs, were convinced they had the upper hand with their client. UniCredit, the financially stretched Italian bank, needed to raise €7.5bn in a rights issue. It had drafted in an unusually large panel of 10 banks to ensure the deal went smoothly despite a jittery market.

But the Goldman pair were peeved they had not secured the prestigious lead role of global co-ordinator, all the more so because that position had gone to a rival – Bank of America Merrill Lynch – and they were nervous about the underwriting risk amid the eurozone crisis.

Their response as the deal came to a head in November was to orchestrate a rebellion with bankers at Morgan Stanley and JPMorgan Chase, demanding that UniCredit appoint one or more of them as joint global co-ordinators or at least give all 10 “bookrunners” a vote on the structure of the risky rights issue.

“They felt they had UniCredit by the balls,” says one person close to the transaction. “They thought that without them the deal couldn’t happen.”They were wrong. The Italian bank had a back-up plan and drafted in the French duo of BNP Paribas and Société Générale as new underwriters on the deal. JPMorgan clung on to its mandate. But both Goldman and Morgan Stanley were ejected despite vocal protestations. By the end of January, UniCredit had successfully raised its funds – and Goldman Sachs had alienated another client.

The bank, however, said the suggestion that it would take advantage of a long-time client during a rights issue was “untrue”. “We were one of a group of 10 banks picked to be in the syndicate and we ended up not participating due to a difference of opinion on the contract regulating the transaction,” it said.

The incident exposed behaviour somewhat akin to that criticised by Greg Smith – the previously obscure Goldman equity derivatives trader who shot to fame on Wednesday when he excoriated his employer’s ethics while announcing his resignation in a New York Times opinion article. “It astounds me how few people in senior management get a basic truth: If clients don’t trust you they will eventually stop doing business with you,” Mr Smith wrote.

However much Goldman and its supporters play down the seniority and relevance of a disaffected employee, criticism of this kind from an insider has added a new dimension to the chronic reputational damage the Wall Street investment bank has suffered over the past couple of years. Staff at the bank’s Lower Manhattan headquarters, at its European base in London’s Fleet Street and at offices around the world often admit privately to feeling under siege as a sequence of scandals sharpens scrutiny of the way Goldman interacts with customers and counterparties.

Each row has added to pressure on Lloyd Blankfein, chairman and chief executive, and speculation has surged again this week that the 57-year-old will depart sooner rather than later.

Most damaging of all was the allegation two years ago that Goldman had misled investors in mortgage derivative products – an affair that ended with a $550m fine from the Securities and Exchange Commission and a US Senate hearing at which Mr Blankfein and fellow executives were cross-examined fiercely by lawmakers over various home loan products.

Private lawsuits followed and last year Eric Holder, attorney-general, said the Department of Justice was investigating. Goldman set up a business standards committee to try to address the criticism.

More recently a judge criticised Goldman for conflicts of interest in the pending merger of El Paso and Kinder Morgan, two US energy groups. After all of that comes Mr Smith’s j’accuse of systematic disdain for its clients.

Goldman has long thrived on the strength of its reputation for hiring the brightest and being the best in the market at whatever it does. Some insist that this brand value has not been fundamentally tarnished – although many in that camp have at least a past link to the bank.

Christopher Flowers, head of JC Flowers, the private equity firm, ran Goldman’s financial institutions group for 19 years. He speaks for many alumni when he disputes the idea that anything has changed at the bank.

With barely concealed anger, Mr Flowers says he does not recognise the picture of Goldman painted by Mr Smith. “I left Goldman Sachs in 1998 and I see Goldman today as capable and effective for clients, and as far as I can tell, not much different in its culture. Of course Goldman has conflicts it has to manage, just as it did when I was there. I think Goldman manages these quite effectively but ultimately Goldman’s primary responsibility is to its owners.”

Brad Hintz, chief financial officer of Lehman Brothers in the late 1990s and now an analyst at AllianceBernstein, shares Mr Flowers’ belief that the culture corrosion identified by Mr Smith is an exaggeration. “It is hard to accept that 12 years ago Goldman Sachs was a convent and today it’s a bordello,” he says. “It is in Goldman’s best interest to maintain long-term relationships with its clients ... Goldman partners are not choirboys but they understand its future relies on the continued goodwill of its clients.”

Nevertheless, there are customers of the firm – not to mention some current and former staff – who would not disagree with Mr Smith’s point that the “culture” of Goldman has become more aggressive and self-interested over the past decade and that client interests can be sidelined in the way the bank operates and thinks about making money.

“I despise Goldman,” says the chief investment officer of one UK asset manager. “It is completely self-serving and I do my best to persuade people not to do business with them. When they get involved in a business it is a good signal for us to withdraw. Having said that, I am not aware that it has changed recently. That has been the case for a very long time.”

Others share that vehemence but a more common reaction among dozens of customers, bankers and rivals contacted by the Financial Times is that banks’ relationship with clients is inherently messy. “We have had a love-hate relationship with Goldman for a number of years,” says Greg Hayes, chief financial officer of United Technologies, the US maker of lifts and jet engines, which has just hired it to sell some businesses. “For us it is about what these banks bring to the table and I think that Goldman has the intellectual capital; they have got the knowhow to do these divestitures. There are bad apples and bad actors in every one of these companies.”

In 1929, when the world last experienced a comparable financial crisis to today’s upheavals, Goldman’s response came in the form of Sidney Weinberg, the most famous leader in the bank’s history. He steered Goldman away from trading. Today, there are calls for a similar change of direction.

People close to Mr Blankfein say he has given no indication he will bow out soon and could even stay for a couple of years more. Some business associates bridle at the charge that he is at fault for the bank’s predicament. “He’s trying to lead this firm at a time when God couldn’t lead it without being criticised,” says Michael Bloomberg, mayor of New York City. “To blame Lloyd Blankfein for the bad press is ridiculous. To blame him for the mortgage crisis is ridiculous.”

But critics inside the group say Mr Blankfein’s refusal to lay out a clear succession path has itself caused anger and impatience for a definitive break from the problems of the past few years. A barely concealed positioning is under way among several men at the top of the company to succeed Mr Blankfein, aged 57.

Among Goldman bankers there are those who think Gary Cohn, the president and long-time favourite, is still the likeliest to take the top job. Under this scenario the 51-year-old, with a similar background to Mr Blankfein – both men traded metals earlier in their banking careers – can be “Lloyd plus”, like him but even sharper and without the baggage. Yet some insiders believe Mr Cohn is now too closely aligned with Mr Blankfein. With trading under threat from regulatory reforms, some current and former employees believe traders such as Mr Blankfein and Mr Cohn might have to make way for a more traditional banker in the Weinberg mould.

Mr Cohn’s main rivals for the job include Mike Evans, head of growth markets. Both have critics among Goldman partners and top staff are lining up behind one or the other. David Solomon, for example, who runs investment banking, supports Mr Cohn, according to people in the know, though he could himself emerge as a compromise candidate.

Some partners suggest the most acceptable compromise would be for Mr Blankfein to surrender his title as chief executive, move to the chairman’s office and be replaced by two co-chief executives – Mr Cohn and Mike Sherwood, the British-born and London-based co-head of its international operations. Other permutations find room for Mr Solomon, Mr Evans or Harvey Schwartz, head of sales.

The nagging truth, however, is that the problems of Goldman Sachs are not just a product of a trading mentality. It was, after all, advisory bankers rather than traders who hurt the group’s reputation in the UniCredit affair. Whoever leads Goldman from now on faces a long-term task to restore the bank’s image right across its business.

(Additional reporting by Henny Sender, Dan McCrum, Kate Burgess and Jeremy Lemer)

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