Goldman Sachs is expecting a pretax hit of approximately $400 million in its third-quarter results as the bank continues to unwind its ill-fated consumer business. CEO David Solomon shared this news at a conference, explaining that by selling off Goldman’s GM Card business and a separate portfolio of loans, the bank will experience a revenue hit in the upcoming results. This move is part of Solomon’s decision to pivot away from the consumer operations that the bank began in late 2022, leading to a series of write-downs as chunks of the business are sold off. Specifically, the credit card business, including the Apple Card, saw rapid growth but also resulted in losses and regulatory challenges.
Following the decision to exit the consumer business, Goldman Sachs is shifting its focus to asset and wealth management as a way to drive growth. One of the steps taken in this direction was being in talks to sell the GM Card platform to Barclays, as reported by The Wall Street Journal in April. Solomon also mentioned that trading revenue for the quarter is expected to decline by 10%, largely due to a tough year-over-year comparison and challenging trading conditions in August for fixed-income markets. This shift in focus underscores the bank’s effort to streamline its operations and prioritize areas that are more aligned with its long-term strategic goals.
The decision to unwind the consumer business and take a significant pretax hit in the third quarter reflects the challenges that Goldman Sachs has faced in this area. While the rapid growth in retail lending through the credit card business showed promise, it also brought about losses and regulatory friction that ultimately led to the decision to pivot away from this segment. By refocusing on asset and wealth management, the bank aims to leverage its strengths in other areas to drive growth and enhance its overall financial performance.
The move to sell off the GM Card platform to Barclays is part of Goldman’s strategy to streamline its operations and optimize its resources. By divesting itself of certain consumer businesses, the bank can reallocate its capital and focus on areas that are more aligned with its core strengths and long-term strategic objectives. This strategic shift is in line with the broader trend of financial institutions reassessing their business models and prioritizing areas that offer the highest potential for growth and profitability.
Despite the challenges and turbulence related to the consumer business, Goldman Sachs remains focused on its long-term strategic goals and is taking proactive steps to position itself for future success. By acknowledging the need to unwind certain operations and take a pretax hit in the third quarter, the bank is demonstrating a willingness to make difficult decisions in pursuit of its broader objectives. This strategic realignment, combined with a focus on asset and wealth management, is indicative of Goldman’s commitment to adapting to changing market dynamics and driving performance in a competitive environment.
As Goldman Sachs prepares to report its third-quarter results, the impact of unwinding the consumer business and taking a pretax hit will be a key factor to watch. The evolution of the bank’s strategic priorities, including the focus on asset and wealth management, will also be worth monitoring as the bank navigates the challenges and opportunities in the financial services industry. Overall, Goldman’s efforts to streamline its operations, optimize its resources, and prioritize areas of growth reflect a proactive approach to managing its business in a dynamic and evolving marketplace.
