Why Goldman Investors Will Cheer When Lloyd Blankfein Leaves

There’s only one thing that really matters to Goldman Sachs Group Inc. investors, and that’s how the stock performs relative to those of rival banks and the broader stock market.

On that basis, investors shouldn’t be unhappy if Chief Executive Lloyd Blankfein actually steps down at the end of the year, if not sooner. The stock initially dipped when the Wall Street Journal reported that Blankfein was preparing to step down, but it quickly recovered to close Friday up 1.7%, even as Blankfein, in just his 37th tweet ever, threw cold water on the report.

Goldman, viewed by many as the world’s most prominent investment bank, takes pride in hiring the best of the best, as witnessed by the number of former Goldman executives in high-ranking government positions over the years.

With that in mind, it’s not enough to be “one of the best” bank stocks during Blankfein’s reign, which began in June 2006 when he replaced Henry Paulson, who became secretary of the Treasury under President George W. Bush. That’s why investors should perhaps cheer, rather than jeer, a change at the top.

Since the end of June 2006, Goldman’s stock has run up 80%, while, over that same time, here’s how one key rival and the stock-market benchmarks have fared:

• J.P. Morgan Chase & Co.’s stock has nearly tripled, soaring 181%. CEO Jamie Dimon started running the bank about six months before Blankfein took over at Goldman.

• The Dow Jones Industrial Average has soared 127%.

• The S&P 500 index has climbed 119%.

Since Jan. 1, 2010, when Brian Moynihan became CEO of Bank of America and James Gorman became Morgan Stanley’s CEO:

• Goldman’s stock has gained 60%.

• Bank of America shares have run up 117%.

• Morgan Stanley’s stock has climbed 98%.

Since Sept. 23, 2013, when Goldman joined the Dow Jones Industrial Average:

• Goldman’s stock has gained 64%.

• The Dow has rallied 65%.

• Shares of 13 Dow components that have been components since Goldman joined have outperformed Goldman’s stock, including J.P. Morgan (up 129%).

It hasn’t been all bad for Blankfein and Goldman investors.

Since Oct. 16, 2012, when Michael Corbat became CEO of Citigroup Inc.:

• Goldman’s stock has advanced 120%.

• Citigroup shares have rallied 104%. But keep in mind that Citi’s stock is still down 84% since June 2006, as one of the hardest hit banks that survived the Great Recession.

Since Oct. 12, 2016, when Timothy Sloan took over as CEO of Wells Fargo after a sales-practices scandal:

• Goldman’s stock has climbed 60%.

• Wells Fargo’s stock has gained 28%. But keep in mind that Wells Fargo has been shackled by regulators since the scandal, including recent Federal Reserve sanctions that could slash the bank’s profit by as much as $400 million this year.

And does Goldman really consider Citigroup and Wells Fargo rivals?


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