Main Street Push Dims as Goldman Books Loss on Marcus Loan Sale
Goldman’s Main Street push is receding a bit further into memory.
By booking a $470 million loss on the partial sale of its book of Marcus loans, by putting GreenSky up for sale, by showing stasis in its installment loan business, Goldman Sachs’ latest earnings report shows retail ambitions may have been overambitious, and it is turning its gaze much more fully to Wall Street once again.
Earnings supplementals released by the company show that installment loans in the March quarter stood at $6 billion, up from $4 billion a year ago but roughly in line with the $6 billion logged in the fourth quarter. Credit card loans, at $15 billion in the most recent quarter, were down from $16 billion at the end of the year, and up from $11 billion last year.
CEO David Solomon noted, “We continue to explore strategic alternatives within our consumer platform businesses,” and said the company sold a portion of its Marcus loan portfolio and transferred the remainder to held-for-sale designation.
The actions, he said, are representative of “narrowing our focus in the consumer space.” As for GreenSky, he said that the business had first quarter originations in its core home improvement loans up over 25% year over year and a weighted FICO on total originations of over 780.
“Given our current strategic priorities however, we may not be the best long-term holder of this business,” noted Solomon.
CFO Denis Coleman said that the Marcus loans sold totaled about $1 billion, and the company booked a $470 million loss on the sale; consumer net charge-offs were $245 million (though reserve releases tied to Marcus benefited the company). The net charge-offs equated to an annualized 4.6% rate for consumer loans.
With a nod to the Platform Solutions business, management noted that revenues of $564 million more than doubled year over year, driven by growth in loan balances in consumer platforms. Coleman added that “we are excited to deepen our partnership with Apple through this additional offering and to introduce another source of deposit funding for the firm.”
Later in the call, when asked about what the company would do with the deposits tied to Apple’s new high yield savings account, Solomon said, “We’ll take those deposits along with all the other deposits in our portfolio and deploy it into the client franchise.”
Wall Street Yet Again
Looking ahead, as the company pivots more fully to Wall Street and serving enterprise clients, management sees greenfield opportunity in transaction banking, where $74 million in revenues represented 10% growth year on year; associated deposits were $1 billion.
For Goldman, there’s still some footing to be maintained in consumer banking, though the footprint will be markedly smaller. As Solomon said, “We continue to be focused on our deposit platform and our credit card platform. I do think there are opportunities for us to do other interesting things strategically and how we think about operating it, but we’re going to continue to examine all the things that we can do to make that as successful as possible. … We’ll continue to move forward to bring the card platforms to profitability.”