NEW YORK - If only Goldman Sachs Chief Executive David Solomon could get away with channeling one of the firm’s former leaders. Gus Levy, who ran the Wall Street firm in the early 1970s, is famous for insisting that its bankers be “long-term greedy.” Uttering such words would be a PR disaster these days. But they would also inject some life into the so-so targets Solomon laid out on Wednesday at Goldman’s inaugural investor day.

Solomon is targeting an annual return on equity by 2022 of 13%. Based off last year’s ho-hum 10% performance, that looks promising. But 2019’s results were hit by higher expenses, including a big litigation charge and rising credit-loss provisions. A year earlier the firm cranked out a 13% return from roughly the same amount of revenue.

Getting back to that level isn’t much more than removing 2019’s problems. Solomon’s plan relies on cutting $1.3 billion of costs and reducing funding costs by another $1 billion by replacing debt with rising deposits. Generating more income from the business itself only accounts for half a percentage point of the hoped-for ROE boost.

That’s more of an obvious must-do than a new strategy. No wonder shareholders seem so deflated, with the stock reversing early gains to lag the market and peers from JPMorgan to Morgan Stanley.

Solomon does, though, have more ambitious plans for the longer term. Over the next five years he wants to add $100 billion of high-fee alternative assets to the $240 billion Goldman already manages; double deposits and triple loans at retail bank Marcus; break into transaction banking for companies; grow the investment bank’s client base; and improve performance on the trading desks, among other things.

If successful, that could nudge Goldman’s annual return up to a more exciting mid-teens level. And if its plans for asset management and transaction banking pay off, earnings could become less volatile. Such success would be welcomed by investors, though rewarding such far-off prospects are more typically reserved for Silicon Valley darlings. The bank’s shorter-term goal, meanwhile, feels like a damp squib.

CONTEXT NEWS

- Goldman Sachs held its first-ever investor day on Jan. 29. The Wall Street firm has set targets for the medium term – which it defines as three years – of making a return on equity of at least 13%, reducing its efficiency ratio to 60% and keeping its Tier 1 common equity ratio between 13% and 13.5%.

(Editing by Lauren Silva Laughlin and Amanda Gomez)

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