How Did Goldman Lose $3 Billion?

A large portion of Goldman Sachs’ consumer lending business has lost around $3 billion since 2020, according to the company. It was the Wall Street giants’ first exposure to Main Street, which drove up costs.

Goldman published financial data that reflects its new Reporting Structure in advance of fourth-quarter earnings this week. In October, the bank announced a major overhaul of its investment banking and trading operations, merging them into one organization. In the meantime, they combined asset and wealth management.

Marcus, Goldman Sachs’ consumer banking business, began in 2016 with a bang.

On the back of strong consumer businesses, rivals JPMorgan Chase & Co. and Bank of America Corp. posted large profits. In their Wall Street businesses, this helped them get through tough periods. Goldman Sachs sought in on the action. They have long relied on investment banking and trading businesses.

It All Started from The Big Ambitions

The bank introduced savings accounts, personal loans, and credit cards. Its intentions to be a major force in the industry were signified by its 2019 credit-card partnership with Apple Inc.

Marcus was a billion-dollar investment for Goldman. However, following an early victory with the Apple Card, it struggled to expand its credit-card business. There was no such thing as a long-awaited checking account.

The consumer unit was never a moneymaker. Goldman officially abandoned its dream to bank on the masses in October.

As part of the restructuring process, different bank sections distributed the consumer business. It was formerly housed under the same roof as Goldman Sachs’ wealth-management business.

What’s the Fate of Marcus?

Goldman Sachs’ new asset and wealth management division will absorb much of Marcus. Several of the company’s initiatives, such as its merchant agreements with Apple and General Motors Co. and specialty lending GreenSky, will move into a new category called Platform Solutions.

According to the company’s disclosure on Friday, Goldman Sachs’ Platform Solutions reported a pretax loss of $1.2 billion for the nine months to September 2022. As a result, it lost $1 billion in 2021 and $783 million in 2020, taking into account operating expenses and funds set aside to cover any loan losses. Transaction banking is also part of the unit’s services, enabling banks to pay each other, customers, and other entities.