Goldman Sachs chief executive David Solomon said the bank was exploring “strategic alternatives” for its consumer platforms business, which could include selling off its credit card partnerships with Apple and GM, or GreenSky. , the point-of-sale lender it acquired in 2022.
At an investor day on Tuesday, Solomon pledged to end losses at its consumer lending and fintech division by 2025 while considering alternatives for parts of the business, including a sale or restructuring. The newly created division, called Platform Solutions, has made more than $3 billion in pretax losses since 2020.
Solomon was trying to convince shareholders to look past staff anger at the sweeping cuts and costly gamble on retail banking, and to trust his efforts to increase exposure to less volatile companies.
“It became clear that we were missing some competitive advantages and were doing too much too fast, which affected our execution,” Solomon said during a presentation at the bank’s Manhattan headquarters.
Goldman shares were down about 1.8% in morning trading in New York, a steeper drop than the broader market.
Since taking over as chief executive in 2018, Solomon has grown Goldman’s market share in trading and trading. But he’s been less successful in his efforts to build companies that generate the kind of stable returns that are valued by shareholders, such as asset and wealth management.
Investors had begun to question the strategy after a sharp fall in fourth-quarter earnings highlighted the gap with rival Morgan Stanley, which was backed by its own booming wealth unit.
However, on Tuesday Solomon reaffirmed his ambitions to expand into asset and wealth management, urged shareholders to look at results over a three-year period rather than disappointing financial numbers in 2022 and set out a timetable for sell the bank’s volatile investments made with its own capital.
Solomon’s case for a more sustainable Goldman is three-fold: operate more efficiently, gain market share in investment banking and trading, and grow in asset and wealth management to generate very stable fees. sought after by investors.
The pitch is similar to that presented in 2020 at the bank’s first Investor Day, although it now lacks the focus on retail banking. Last year, Goldman decided to scale back its Main Street ambitions through its Marcus brand following shareholder unease over escalating losses.
A scaled-down version of the Marcus business, for which Goldman is not exploring strategic alternatives, now sits within the wealth management unit.
Solomon stuck to a target return on average tangible common equity – a key measure of profitability – of 15-17%. That was up from a previous target of over 14%, but still lagging longtime rivals Morgan Stanley and JPMorgan Chase, which currently boast higher trading multiples than Goldman.
Goldman has maintained a gross fundraising target of $225 billion for its asset management alternatives by 2024, as well as goals to earn more than $10 billion in management and other fees out of company wide.
The bank gave more details of its plans to sell most of its so-called on-balance sheet investments, a holdover from the days when the bank bet its own capital in areas such as private equity and real estate.
It aims to reduce its $30 billion in legacy investments to less than $15 billion by the end of 2024 and sell them all over the next three to five years. The plan is to replace this income over time with management and performance fees from investments in third-party funds.