The lead director of Goldman Sachs (GS) "seemed very supportive" of CEO David Solomon in a recent meeting with Wells Fargo banking analyst Mike Mayo, who published a note Monday stating that Solomon "is not going anywhere anytime soon."
The meeting "leads us to conclude that the CEO will stay in his role for at least the medium term,” Mayo said in his note titled "CEO Stays—No Ifs, ands, or buts."
The lead director of the bank's 12-member board, Adebayo Ogunlesi, not only "seemed very supportive of the CEO," Mayo added, but he also made it clear "that there is a disconnect between media reports and the board's conclusions from their oversight."
Solomon has attracted public scrutiny after reporting the firm's lowest quarterly profits in three years. He is wrestling with media reports about his leadership style, job cuts and reports of partner unrest.
Mayo said Ogunlesi "reiterated that he does not see the CEO in the same light as some of the negative press. In particular, he expressed a view that his activities mirror those of executives at other large corporations and banks."
Under Solomon the bank is also attempting a tricky retreat from a costly push into consumer lending while it waits out a tepid period of dealmaking.
The deal drought appears to be easing this month with a new string of initial public offerings where Goldman is acting as one of the lead bankers, including IPOs from chipmaker ARM and grocery e-commerce company Instacart.
Mayo said Ogunlesi "feels that the company is on course with its strategy to deliver mid-teens returns over the medium term" and highlighted Solomon's "success with strategy, execution, the pivot away from consumer (albeit late), and results that have been superior to peers."
Goldman’s stock has recovered in September and is flat so far this year. It has outperformed Bank of America (BAC) and Citigroup (C) while underperforming Morgan Stanley (MS) and JPMorgan Chase (JPM). The KBW Nasdaq US bank index (^BKX) is down 19% for the same period.
Since Solomon became CEO in October 2018, Goldman's stock is up 53%. That is better than all Wall Street rivals except Morgan Stanley and Jefferies (JEF), which has rallied 95%. The KBW index has fallen 21% over the same period.
Solomon, who is still chairman of Goldman's board, told Yahoo Finance earlier this month that the string of IPOs could be a “virtuous cycle” spurring a revival of dealmaking in the months ahead.
Last week at a Barclays banking conference he said the bank’s trading activity is “good” this quarter but that September also presents a "seasonal slowdown” and comparison to the year-ago quarter will be “tough.”
Mayo said in his Monday note that he asked for the meeting with Ogunlesi "given questions about strategy, execution, management, and reputation," and said it was the first such meeting in seven years.
As lead director Ogunlesi is considered the most powerful of Goldman's independent board members. He is also CEO of Global Infrastructure Partners, a private equity firm.
Ogunlesi told Mayo that partner turnover at Goldman has been typical, the firm has identified 200 future leaders, and the pipeline of new talent "remains strong," with 236,000 applicants for last summer's internship program. That led to 2,600 full-time hires in 2023.
"It is still harder to get in Goldman than to get accepted to Harvard," Mayo said.
Ogunlesi also "acknowledged that in hindsight, the board could have done better regarding consumer lending" and a few other issues.
Mayo said there are issues at Goldman to monitor going forward, and execution will be key. His conclusion is the "CEO is not going anywhere anytime soon, the strategy is on an effective multi-year path, a turn in capital markets activity will make much of the media attention go away, and the board is in anything but caretaker mode."