Goldman Sachs is “considering strategic alternatives” for its consumer business, CEO David Solomon said at the bank’s long-awaited investor day Tuesday.
Solomon did not detail what those options might be, leaving open the possibility of a sale of its credit card business or even the GreenSky installment-lending platform it bought less than 18 months ago.
“I’ve certainly reflected a lot over the course of the last three years,” Solomon said, according to The Wall Street Journal. “There were some clear successes, but there were also some clear stumbles.”
Many Goldman investors will undoubtedly lump the bank’s consumer-banking push under “stumbles.”
Goldman last month disclosed nearly $4 billion in losses since 2020 and attributed them to its Platform Solutions unit, which includes GreenSky, credit cards and a subset of Marcus business.
The bank aims to grow Platform Solutions to a pretax break-even point by 2025, it said Tuesday. Platform Solutions, to its credit, contains Goldman’s transaction-banking business, which is already profitable.
Tuesday’s pullback on consumer banking, however, marks a near-180-degree turnabout from Goldman’s previous investor day in 2020, where many of the bank’s splashier stretch goals centered on businesses reassigned in October to Platform Solutions.
The bank in 2020 said it wanted to more than double deposit balances at Marcus by 2025 and nearly triple its consumer loans and card balances in the same time frame.
“Sometimes we fall short. Sometimes we don’t execute. But we always learn and adapt,” Solomon said Tuesday, according to Reuters.
About Goldman’s consumer business, Solomon said “it became clear that we lacked certain competitive advantages and that we did too much too quickly,” The Wall Street Journal reported.
If there’s one area upon which Solomon pinned the bank’s hopes Tuesday, it may be asset and wealth management, a segment he described to CNBC as “the real story of opportunity for growth for us.”
Goldman outlined plans to grow revenue organically in that division by a high-single-digit percentage over the next three to five years, generating fees that are far more stable than the bank’s relatively volatile trading operations.
The bank, meanwhile, wants to trim $30 billion of legacy investments to less than $15 billion by the end of 2024 and sell them all in the next three to five years, according to the Financial Times.
Solomon, for his part, urged shareholders to take the long view, and observe the bank’s results over the past three years rather than looking solely at 2022.
In that respect, Tuesday’s investor day hewed closer to the “strategic update” Goldman issued last year than to its relatively ambitious 2020 predecessor.
Solomon warned last year that 2021’s record-setting numbers, including a 24.3% return on tangible common equity were not “sustainable in any way.”
Goldman on Tuesday reiterated a goal of 15% to 17% ROTE, in line with the target the bank established last year.
“We’re focused on profitability, the right strategy and will be nimble and flexible,” Solomon said Tuesday, according to The Wall Street Journal.
The investor day may prove crucial for Solomon’s tenure atop the bank. Goldman launched a 3,200-employee cull in January as a cost-control measure. But Solomon, at a meeting this month with the bank’s partners, said he waited too long to initiate the cuts.
Some partners, perhaps in reaction to sagging morale at the bank and precipitous cuts to bonus pools, have considered bringing their concerns about Solomon’s leadership directly to the bank’s board, Business Insider reported this month.