Yahoo Finance Goldman sidelines loss-making retail bank in U-turn for chief
Goldman Sachs is sidelining its retail bank Marcus to focus on its more profitable arms, four years after launching savings rates in the UK.
The decision to pull back from its strategy of trying to build a consumer banking operation forms part of a major reorganisation of the business and is a significant U-turn for David Solomon, the chief executive.
The Wall Street behemoth invested significantly to build Marcus and was offering savers a far higher rate of interest for savers to deposit savings with them compared with retail rivals.
Since becoming chief executive in 2018, Mr Solomon has sought to expand Goldman's footprint in retail banking.
But the consumer banking unit that launched in the US in 2016 has struggled to gain traction and has suffered heavy losses.
Internally, the bank forecast that Marcus's losses would climb to more than $1.2bn in 2022, taking cumulative losses to more than $4bn, Bloomberg reported. Goldman declined to comment on the loss.
Mr Solomon has previously said the business could generate revenues of over $4bn by the end of 2024, while it posted a net revenue of $1.49bn in 2021. The unit has around $100bn in deposits and serves 14m customers.
It offers digital banking products such as loans, savings and certificates of deposit. It also provides credit cards via a partnership with Apple.
Mr Solomon told CNBC: “As we’ve learned, the concept of really being broad with a consumer footprint is not really playing to our strength.”
The reorganisation came as Goldman’s traders helped rescue results during the third quarter following a sharp slowdown in investment banking.
The trading business posted revenues of $6.2bn between July and September, an 11pc increase on the same period last year that was better than analysts had expected. Investment banking revenues fell by more than half.
Brennan Hawken, an analyst at UBS, said: “I would attribute the outperformance in Goldman Sachs today to a combination of the pullback from the consumer business and the solid results in a challenging environment – with the former more important than the latter.
“Investors have always been lukewarm, at best, about Goldman’s consumer aspirations.”
The reorganisation will also involve the bank combining its trading and investment-banking divisions.
Shares in Goldman Sachs, which have lagged behind some Wall Street rivals in recent years, climbed more than 3pc in New York.
