Goldman Sachs is set to incur a roughly $400 million pretax hit to its third-quarter earnings as the bank continues to wind down its consumer operations.
CEO David Solomon disclosed this during a conference on Monday, highlighting the financial impact of offloading its GM Card business and a separate loan portfolio. This move is part of the bank’s broader retreat from its consumer-focused strategy, which has faced significant challenges in recent years.
The decision to unwind parts of its consumer business marks the latest chapter in Goldman’s shift away from retail banking. The bank initially ventured into consumer lending with initiatives like the Apple Card and personal loans but encountered losses and increased regulatory scrutiny. After struggling with the division’s performance, Goldman began divesting from these consumer ventures in late 2022, leading to a series of write-downs.
Goldman is now redirecting its focus towards asset and wealth management to fuel future growth. The company has been in discussions to sell the GM Card platform to Barclays, a deal reported earlier this year. Solomon noted that the combination of the GM Card sale and other divestitures is expected to result in the $400 million pretax revenue impact when third-quarter results are announced.
In addition to the challenges in its consumer business, Goldman also faces a slowdown in trading revenue. Solomon revealed that trading revenue for the quarter is likely to drop by about 10%, citing difficult market conditions, particularly in fixed-income trading during August. This decline follows a strong trading performance in the third quarter of 2023, when equities trading saw an 8% rise.
Despite these hurdles, Solomon expressed optimism about the bank’s positioning and future outlook. He pointed out that while trading revenues may be down, investment banking continues to improve, with dealmaking showing signs of recovery. However, Solomon refrained from giving specific revenue forecasts for investment banking, noting that private equity-led deals are expected to pick up towards the end of the year and into 2025.
CNBC, Reuters, and Yahoo Finance contributed to this report.
