Fall From Eminence; A Paradigm Shift In Goldman Sachs' Business Model

The challenging macroeconomic environment is forcing more and more investment banks to slash their costs and overheads in order to maintain their profit margins. Fitch, a premier US credit rating agency, declared in a report that further cost cuts and concentration are highly likely among US banks. The credit rating agency believes that banks will increasingly concentrate on areas in which they have a competitive advantage. Most of the investment banks are already taking steps to restructure their businesses. While UBS is aggressively decreasing the workforce of its investment bank, Goldman Sachs (GS) and JPMorgan (JPM) are concentrating on reducing costs and overheads.

In conclusion, where the recent quarter's results are encouraging, we believe the bank still faces problems in attracting and retaining professional workforce. Also, the bank is overvalued compared to its peers. Therefore, we do not recommend our investors to take a long position in the stock. However, proper integration of technology to increase operational efficiency could create a competitive advantage for the bank. Therefore, investors should be on the lookout for any updates on this front. Read full story