LONDON (Reuters) - Goldman Sachs (GS.N) is poised to sign a lease for a new office in Milan that will significantly boost its presence in Italy as Britain prepares to leave the European Union, sources familiar with the matter told Reuters.
The Wall Street bank is finalizing the details of a new office for more than 100 people in the bustling heart of Milan, near the Duomo cathedral, increasing its Italy headcount almost six-fold, said the sources who declined to be named as the plans are confidential.
This is a radical move for Goldman which currently employs about 20 people in Italy and has the smallest presence on the ground of the top five U.S. investment banks, despite making the biggest fees.
Goldman’s move comes as Italy’s slow economic recovery is finally gathering pace and business morale is at its highest for a decade.
Export volumes climbed 2.8 percent in the first eight months and GDP is forecast to grow this year at its fastest rate since 2010, prompting Standard & Poor’s to raise its rating on Italy’s sovereign credit for the first time in 35 years.
While the economic recovery may generate more fees for investment banks, several sources said that Goldman’s decision to bet on the euro zone’s third-largest economy is partly driven by its efforts to reorganize its operations in Europe for when Britain leaves the EU, scheduled for 2019.
The New York-based lender, which has around 6,000 employees in Britain, needs to ensure it will be able to service clients in the EU in the event of a hard Brexit.
Goldman Sachs denied the Italian expansion was motivated by Brexit. “These moves reflect our ongoing investment in our Italian franchise. This investment is made independently of our Brexit contingency plans,” a spokesman for the bank said.
Goldman said on Oct. 4 that it had agreed to lease 10,000 square meters of office space at the new ‘Marienturm’ building in Frankfurt, providing space for up to 1,000 staff.
But the bank, whose boss Lloyd Blankfein recently called for a second vote on Brexit, wants to raise its game in other European cities where its presence on the ground has so far been weak.
Blankfein has also said the bank would have hubs in Frankfurt and Paris after Brexit and that it would be up to the staff to decide whether or where they want to move to from London.
Goldman is set to move into its new Milan office in the first quarter of 2019, the sources said.
Its new office, which is only a short walk from its existing base in Piazzetta Bossi, will accommodate several investment bankers who are currently based in London.
Reuters reported on Sept. 15 that Goldman’s co-head of Italy Francesco Pascuzzi is among a series of London-based bankers looking to move to Milan early next year.
Other jobs will also be shifted from London to Italy at the start of 2018, the sources said, with one adding the U.S. bank is making a global push to better penetrate local markets by having its bankers based close to the companies they cover.
Relocation packages for many Italian nationals on Goldman’s London payroll are currently being negotiated, two of the sources said.
There is no final tally of how many will move from London as opposed to hirings in Italy but the decision to open a bigger office in Milan is expected to have an impact on Goldman’s London operations where most Italian bankers have so far been based.
Goldman Sachs currently leases its Milan office from law firm Clifford Chance but the lease will expire in the first half of 2019.
Unlike HSBC and BNP Paribas which recently moved to the new financial district of Porta Nuova, Goldman has decided to stay in Milan’s city center.
Goldman currently employs about eight wealth managers, five investment managers and two investment bankers in Milan together with back office, compliance and other administrative staff.
Several Italian financiers who handle some of their country’s biggest deals from London have recently returned to their homeland.
Earlier this year, former Goldman Sachs banker Antonino Mattarella became Bank of America’s Italy head in Milan.
For those returning, Italy is offering significant perks, including a 50 percent income tax break.
JPMorgan and other financial institutions are also looking for new offices in Italy’s financial capital.
Editing by Adrian Croft