Last week, the bank disclosed that it had accumulated $3 billion in losses in its consumer banking franchise since 2020, mostly money set aside to cover potential loan losses in its Marcus personal loan business.
Lights are on at the world headquarters of Goldman Sachs in New York on Tuesday, Jan. 24, 2023. The storied investment bank has recently signaled a partial retreat from its efforts to build up a consumer banking business. The World Trade Center is at right. The storied investment bank spent eight years attempting to expand its business beyond corporations and the wealthy.
“I think it became clear to us early in 2022 that we were doing too much, it was affecting our execution,” said David Solomon, Goldman’s chairman and CEO, in a call with analysts when the bank reported its results earlier this month. The online savings account is not going away, and is considered an asset by the firm, Solomon told investors. The firm now holds more than $100 billion in retail deposits, which is a cheap form of capital for the investment bank that historically hasn’t had access to such forms of financing.
The large losses have caught the attention of bank regulators, which have also been looking into Goldman’s personal lending operations. The Wall Street Journal reported Friday that the Fed is investigating whether the firm had adequate safeguards around its personal loan business as it ramped up its lending.
“We have never understood the desire of to expand so much in consumer given such strength of its 150-year-old legacy franchise in capital markets,” wrote Mike Mayo, a long-time banking industry analyst with Wells Fargo Securities, in a note to investors.
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