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NEW YORK (AP) — Goldman Sachs no longer wants to be everyone’s bank.
A renowned investment bank spent eight years trying to expand its business beyond corporations and the wealthy. But in recent months, Goldman has signaled a partial exit from these efforts by scrapping plans for a widely available checking account and halting its personal lending business. The savings account and credit card businesses have survived for now.
Last week, the bank revealed it had accumulated $3 billion in losses in consumer banking franchises since 2020. It is reportedly investigating whether
The recession of consumer finance comes as Goldman seeks to refocus its roots on trading, investing, trading, advising companies on trading and serving the wealthy. The company’s revenues from trading and wealth management accounted for two-thirds of its total revenues last year.
“By the beginning of 2022, it’s clear we’re overdoing it,” Goldman Sachs Chairman and CEO David Solomon said on a conference call with analysts earlier this month when it released its results. I think it has affected our execution.
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Goldman’s foray into consumer banking was one of the biggest changes in the company’s 154-year history. The investment bank had to legally transform into a bank holding company during the 2008 financial crisis to gain access to the Federal Reserve’s emergency funding operations. This has led to jokes within the industry that Wall Street giant Goldman Sachs is about to issue something as mundane as his ATM card.
The joke came true when Goldman bought GE Capital assets and opened an online-only savings account with above-market interest rates.Savings accounts were an unexpected hit for Goldman, forming waiting lists in both the US and UK after initial launch
Solomon told investors that online savings accounts aren’t going away and are viewed as an asset to the company. The company currently holds more than $100 billion in personal deposits. This is a cheap form of capital for investment banks that historically have not had access to such forms of funding.
Launched in 2016 with a wide-ranging advertising campaign under the brand name Marcus, the personal lending business has become a thorny problem for banks. At its launch, Goldman Sachs executives said the Marcus brand was created to give Goldman, ostensibly a power broker between Washington and Wall Street, a friendlier and more reachable edge. I acknowledged that
Unsecured personal loans, which are primarily used by customers to consolidate their credit card debt, have become a burden during the coronavirus pandemic, which has left millions of Americans unable to pay their bills. became. Banks have set aside billions of dollars to cover potential bad debts, and unlike other big banks that were able to release those reserves in 2021 and 2022, Goldman mainly Gold needed to keep growing. New accounting standards requiring banks to model potential credit losses more aggressively also contributed to the decision to scale back the personal lending business.
The huge losses have caught the attention of banking regulators, who are also investigating Goldman’s personal lending business. The Wall Street Journal reported Friday that the Federal Reserve is investigating whether the company had appropriate safeguards in place regarding its personal loan business as it ramped up lending.
A Goldman Sachs spokesperson said, “The Federal Reserve is the primary regulator of federal banks and we do not comment on the accuracy or inaccuracy of any matters related to our discussions with the Federal Reserve. .
Investors have long questioned Goldman’s need to get into consumer finance. The bank had its consumer banking business under its wealth management division in its quarterly results, leading to criticism that Goldman was hiding Marcus’ losses from investors.
“[Goldman]has a 150-year history of traditional franchise strength in the capital markets,” said Mike Mayo, a longtime banking industry analyst at Wells Fargo Securities. I never understood the desire to expand so much.” In a note to investors.
One area Goldman has not exited is its relatively new credit card business, which the company calls platform solutions. The company is the underwriter of Apple Card, a popular credit card deeply embedded in Apple Pay, launched in 2019, and a co-branded credit card with General Motors. Goldman and Apple announced in October that they would extend their relationship through the end of 2010. Platform solutions also include his GreenSky, a fintech lender focused on home improvement loans, which the bank bought in 2021.
Apple Card and GM Card were major acquisitions for Goldman, but new business was a headache for the company.
The bank said in August that the country’s financial watchdog, the Consumer Financial Protection Bureau, is investigating the administration of credit card accounts, including billing, credit reporting, dispute resolution, and other day-to-day credit card issues. made it clear that
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