I never worked for Goldman Sachs (GS), but always admired the bank and its richly talented Bankers. They tended to be the standard that most investment bankers looked to emulate, if we are all going to be honest about it.
Even at the illustrious JPMorgan, there was grudging respect and admiration for the GS guys. Afterall, they were on all the best Investment Banking mandates and seemed to be able to rake in the fees even during difficult times. They just seem how to know how to make money effortlessly.
I, therefore, watched with interest when, in 2016, they decided to diversify into the not so sexy, cut throat business of consumer banking. It somehow did not seem like a GS thing to do. Yes, there was potentially a lot of money in it, but that was more for the plebs surely?
It was the legendary, now retired GS CEO, Llyod Blankfein (LB) who first started the foray into cheque accounts and credit cards – probably bullied into it after he doubled down on the GS investment banking model in the face of declining revenues. Following LB’s retirement in 2018, his successor, David Solomon (we’ll call him DJ Solly given his legendary skills at the disco turntables), decided to really get the ball rolling and push the consumer business and launching “Marcus” which became their consumer business brand, taking on the likes of JPMorgan and Morgan Stanley.
The rationale was straight forward: GS needed the steady earnings profile of the consumer business to counteract the uncertain, cyclical revenues of the investment bank. GS even acquired the home improvement lender, Greensky, in 2021 at the height of the tech boom, grossly overpaying in the process. I can’t help thinking that GS would have advised their clients against the timing of such an acquisition.
Anyway, 7 years later and the GS’s consumer business is looking decidedly dicey. Losses last year amounted to $3bln and, although revenue shot up significantly, GS had to contend with that other consumer banking headache – Impairments. Even worse, their impairments were higher than either JPMorgan or Morang Stanley’s – a bitter pill to swallow for an outfit like GS.
GS is now looking at “strategic alternatives” for their consumer business, which sounds suspiciously like saying it’s for sale.
As for DJ Solly, GS is notoriously unforgiving towards employees who don’t make money, and have nothing but contempt for those who actually lose money, so he is probably unlikely to be around for much longer. At least he can still set the dancefloor alight with his DJ-ing skills. I am sure that they will be much sought after on the Ibiza nightclub circuit,