Goldman hints at deeper consumer cuts during investor day

Goldman Sachs Group Inc. gave shareholders a report card of Chief Executive David Solomon’s performance, hinted at a further dismantling of the consumer business and offered an upbeat outlook on the opportunities inside its wealth and asset management business.

Those were among the takeaways from the bank’s second-ever investor day, an effort to build confidence in the stock after a dismal 2022 and quell dissatisfaction in the ranks. 

Solomon, president John Waldron and executive Stephanie Cohen each said that the bank is considering strategic alternatives for its consumer-lending business. The trio of references hinted that Goldman is weighing a potential sale among strategic options for its consumer platforms, which are housed in its new platform solutions division, led by Cohen.  

The retail effort has lost nearly $6 billion since it was set up, prompting Goldman to dismantle the plan in its original form and denting confidence in the bank in the process.

In one notable update, Goldman said it would take another two years to just break even on the new division. Cohen said the segment contains “attractive businesses” that leverage the core strengths of Goldman. Still, she said the bank will be flexible and nimble, considering strategic alternatives as it drives toward profitability. 

“We’ve narrowed ambitions in the consumer space,” Solomon said in response to a question about plans for the division. “We will do what’s right for Goldman Sachs, we’re focused on it and we will execute appropriately.” 

Executives emphasized opportunities inside its asset and wealth management business, while pledging to smooth the volatility of earnings by using less capital to make wagers.

Goldman gave a detailed breakdown of how it has performed against previously established targets, trying to reassure investors that over a period of multiple years it can meet its targets even as it fell short on them in last year’s profit plunge. 

The platform solutions division — an assembly of its credit card, installment lending and transaction -banking businesses — has already piled up nearly $4 billion of losses in three years. Solomon, in talking about strategic alternatives for the business in his opening remarks, indicated that even a sale of the installment lending or credit card business is possible. 

One of the biggest sources of volatility in the bank’s earnings has been driven by using its own capital to make wagers — an issue the bank has been vowing to address since Solomon took over. In one of the few new targets being outlined by the bank, it said it would reduce on-balance-sheet investments from $59 billion to less than $45 billion next year. 

The bank offered investors a more forceful case for its asset and wealth management business, calling it the area with the most significant growth opportunity for the bank. It outlined plans for organic revenue growth in high-single-digit percentages over the next three to five years in the $2.5 trillion division.

The “real story of growth is around asset management and wealth management,” Solomon said in an earlier interview with CNBC.

Goldman’s leaders took the stage to lay out new reasons for investors to rally around the stock after a year when profits dropped by half and losses piled up in its retail banking foray faster than expected, prompting it to dismantle that plan. 

In a bid to tame costs, the bank in January began implementing a plan to cut about 3,200 positions, or 6.5% of the bank’s head count, in one of the firm’s largest rounds of job reductions ever. Goldman, like its rivals across Wall Street, has been grappling with falling revenue and profit, amid slumps in deal activity and asset prices. 

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