News

Goldman Sachs Seeks to Reclaim Investment Banking Roots

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Andrew R. Michaud

• October 16, 2023

Goldman Sachs is set to demonstrate its commitment to returning to its investment banking foundations as it prepares to unveil its third-quarter earnings on Tuesday.

Muted Expectations

Anticipations for the earnings release are conservative, given the recent dearth of capital markets activity aside from a few significant initial public offerings, such as Arm Holdings and Instacart. Furthermore, despite the frenzied bond yield surge, trading revenue is not expected to deliver exceptional results.

Projected Numbers

Analysts predict a 32% decline in profit for Goldman Sachs, amounting to $2 billion. This translates to earnings of $5.42 per share on revenue totaling $11.2 billion.

Strategic Focus

Considering the substantial decline in deal-making and trading compared to the prosperous period of 2021, Wall Street will be directing its attention towards more strategic matters. One notable topic of interest is Goldman Sachs' exit from its costly venture into consumer banking.

GreenSky Sale

Goldman Sachs recently announced the sale of its lending platform, GreenSky, to a consortium of institutional investors led by Sixth Street. The acquisition of GreenSky was completed just last year at a significant cost of $1.7 billion. The sale to Sixth Street is expected to result in a loss and reduce earnings by 19 cents per share.

Goldman Shifts Focus to Investment Banking

Goldman Sachs, one of the leading investment banks in the world, has announced the sale of its consumer-focused business, highlighting a strategic shift towards further strengthening its investment banking and wealth management divisions.

According to Goldman CEO David Solomonsaid, the sale of the business, branded as GreenSky, will allow the bank to concentrate on its core strengths. While acknowledging that GreenSky is an attractive enterprise, Goldman Sachs is committed to advancing their outlined strategy for their two primary franchises.

This move by Goldman follows recent actions to scale back on consumer-focused ventures. Just last month, the bank sold its personal financial management business, which catered to mass affluent individuals, to Creative Planning, a registered investment advisor situated in Overland Park, Kansas. Financial details surrounding this transaction were not made public.

In addition to the sale of GreenSky, there are indications that Goldman may further retreat from consumer banking. Senior executives within the bank are reportedly eager for Goldman to divest its remaining consumer businesses, including its Apple credit card, other Apple products, and its General Motors credit card, according to The Wall Street Journal.

Insiders familiar with the matter claim that these businesses have caused more difficulties than they are worth. However, it remains uncertain if Goldman will be able to completely sell off these entities due to concerns surrounding the loss rates associated with the Apple credit card.

Goldman Sachs declined to comment on this matter.

As a result, it is expected that investors and analysts will closely observe how Goldman approaches its remaining consumer business in order to gain confidence in the bank's future endeavors.

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