Goldman Sachs likes being Goldman Sachs. It likes that its reputation precedes it. Its executives enjoy the reverent hush that follows when their titles are read out at conferences. Its bookkeepers appreciate that they can skimp on reporting exact details, and instead just wave their hands and remind investors “we're Goldman.”
But eventually a reputation runs out of gas. And Goldman's last few quarters of dismaltrading have been the equivalent of charging at top gear with the emergency brake on. Realizing their waning glory, Blankfein et al have taken the appropriate steps to slather on the sex appeal and dairy products that investors and clients seem to crave. But the efforts haven't quite put investors in an amorous mood:
Executives including securities group co-head Pablo Salame have been meeting privately with investors and analysts to assuage concerns, the sources said. [...] That attempt to soothe relations has not produced results. Seven investors who oversee a total of $3.3 billion in Goldman shares have told Reuters they are unsatisfied with management’s response so far.
Goldman is apparently going around lifting the proverbial kimono for big investors in an attempt to show what's actually going on at the firm as it tries to regain its bond trading crown from usurper Morgan Stanley. Part of the apology tour will reportedly involve Harvey Schwartz giving an unprecedented explanation of Goldman's bond business at an industry conference scheduled for September 12. Though the content of his talk hasn't been announced, investors who've already gotten the spiel have provided some clues:
The executives have explained how Goldman is trying to get investment bankers and traders to generate more revenue by working more closely together, sources familiar with the conversations said.
Hey, that sounds familiar! Partly because it isn't exactly new. See this from nearly a month ago:
Goldman is working with a financial-data company to better understand what percent of each client’s trading business it is getting, and how it can sell more products to existing clients, according to people familiar with the matter.
Or this from just after Goldman's miserable Q2 earnings release in July:
To improve bond trading broadly, Goldman is looking for ways to do more business with existing clients, Chavez said. “This is something all of us are evaluating and making changes and working on, and we’re committed to it,” he said. “We know we need to do better.”
These might be different initiatives, but the broader theme is the same – and it rhymes with cross-selling. No one is going to call it that, but what else do you call it when bankers in different units trade rolodexes and ply their clients with services they didn't ask for?
Of course it doesn't matter what it's called, so long as it works. And on this front Goldman might have something going for it. Whatever else you can say about cross-selling, it kind of works. We can assume, hopefully, that Wells-Fargo-style retail shenanigans simply won't apply to I-banking clients – it's hard to imagine Goldman, say, trading $10 million in T-bills in some corporate account behind the company's back.
The bigger risk is that Goldman gets a short burst of activity from cross-over clients who really do want to test out other items on the buffet table. But eventually existing clients get their fill, and the broader decline in bond trading – whether brought on by changing demand, stifling regulations or whatever – will again make itself known. This is the real problem with cross-selling. It's a way to juice sales without increasing organic demand or responding to what might indeed be secular market shifts. But as we know, admitting FICC defeat is something Goldman is quite loath to do.