Goldman Sachs chief executive David Solomon said the bank was exploring “strategic alternatives” for its consumer platform business, which could include selling its credit card partnerships with Apple and GM, or GreenSky, the acquired point-of-sale lender. 2022.
At an investor day on Tuesday, Solomon pledged to end losses in its consumer credit and financial technology divisions by 2025 while also considering alternatives for parts of the business, including a sale or restructuring. The newly created division, called Platform Solutions, has made a pre-tax loss of more than $3bn since 2020.
Solomon tried to convince shareholders to look past staff anger through sweeping cuts, and expensive push into consumer banking, and believed in the push to increase exposure to less volatile business.
“It became clear that we did not have a certain competitive advantage and we did it very quickly, which affected our execution,” Solomon said in a presentation at the Manhattan headquarters.
Shares of Goldman were down about 1.8 percent in morning trading in New York, a steeper decline than the broader market.
Since taking over as chief executive in 2018, Solomon has increased Goldman’s market share in trading and dealmaking. But they have been less successful in their efforts to build businesses that generate the kind of stable returns that shareholders value, such as asset and wealth management.
Investors began questioning the strategy after a fall in fourth-quarter profits highlighted the gap for rival Morgan Stanley, which is fueled by its emerging wealth unit.
However, on Tuesday, Solomon reiterated his ambitions to expand asset and wealth management, urging shareholders to see results in three years rather than disappointing financial figures in 2022 and setting a timeline for selling the bank’s self-made volatile investments. capital.
Solomon’s thoughts for a more durable Goldman are threefold: to operate more efficiently, to gain market share in investment banking and trading, and to expand asset and wealth management to generate stable fees that investors value.
The pitch is similar to what was presented in 2020 at the bank’s first investor day, although it has now disappeared as an emphasis on consumer banking. Goldman last year decided to scrap its “Main Street” ambitions through the Marcus brand after shareholders grew uneasy about mounting losses.
A scaled-down version of the Marcus business, for which Goldman is not exploring strategic alternatives, is now in its wealth management unit.
Solomon stuck with his goal of an average real return on common equity — a key measure of profitability — of 15 to 17 percent. That’s up from a previous target of more than 14 percent, but still lags longtime rivals Morgan Stanley and JPMorgan Chase, which currently have a higher market cap than Goldman.
Goldman maintains a gross fundraising target of $225bn for alternatives in asset management by 2024, as well as aims to acquire corporate management and other fees of more than $10bn.
The bank gave more details on its plan to sell most of its investments on its balance sheet, a holdover from an era when the bank would offer its own capital in areas such as private equity and real estate.
It aims to reduce its $30bn legacy investment to less than $15bn by the end of 2024 and sell everything in the next three to five years. The plan is to replace this income over time with management fees and performance from investing in third-party funds.