Banking

Goldman’s consumer bank will take longer to break even, CEO says

Goldman Sachs says that it will continue to lose money on its nascent consumer banking business for longer than previously expected.

Chairman and CEO David Solomon said Tuesday that the New York bank likely won’t reach the break-even point for its existing consumer-related products until some time in 2022. The company previously anticipated that it could hit that target in 2021, but pandemic-induced business adjustments have resulted in a delay, Solomon said.

Goldman Sachs CEO David Solomon has not ruled out consumer banking acquisitions. “If something came along that helped us accelerate or advance our strategic growth plans, and we thought it was a good fit strategically … then we would do it,” he said.

Bloomberg

In the first quarter, Goldman plans to launch a wealth management product that will allow U.S. consumers to invest as little as $1,000 in index funds and exchange-traded funds. And before the end of the year, the company expects to introduce a checking account, adding to a suite of digital consumer products that currently includes an online savings account, personal loans and a credit card in partnership with Apple.

More new consumer products could follow, as the firm that long epitomized Wall Street seeks to become the primary bank for millions of Americans. Over the past 12 months, Goldman has announced lending partnerships with Amazon, Walmart and General Motors.

Any additional product launches could further delay the point at which the company’s Marcus consumer unit breaks even, Solomon said. But he added that such investments will not affect Goldman’s ability to meet its companywide financial targets.

Reuters reported last week that Goldman Sachs is considering acquisitions to scale the growth of Marcus. On Tuesday, Solomon affirmed that path as an option, though he said that the bar for such a deal is extremely high.

“If something came along that helped us accelerate or advance our strategic growth plans, and we thought it was a good fit strategically, and we thought we could acquire it and integrate it attractively, then we would do it,” Solomon said.

Goldman says that it has a long-term strategy in consumer banking, but some investors are growing antsy at a time when standalone neobanks such as SoFi are achieving rich valuations. Asked Tuesday about when Goldman shareholders might be able to unlock the value of Marcus, Solomon said, “We’ll continue to execute and wait on that.”

Goldman reports Marcus’s financial results as part of its larger consumer and wealth management division, which recorded $165 million in net earnings during the fourth quarter, up 21% from the third quarter. It did not say how much Marcus lost during the quarter.

Consumer loan growth slowed in 2020, with total loans rising from $7 billion to $8 billion, as the firm tightened its underwriting standards during the COVID-19 pandemic. Goldman’s goal is to reach $20 billion or more in consumer loans by 2024.



 

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