Goldman Sachs Group Inc. CEO David Solomon said Tuesday that the bank’s franchise remains “strong” despite setbacks in its consumer-banking unit, as he looked past a rough couple of months for the marquee investment bank.
In its first investor day in three years and the second since Solomon took the reins as CEO in 2018, Goldman Sachs
reiterated its outlook for average return on equity to 14% to 16%, up from greater than 13% three years ago. The bank also reported an average return on equity of 14.8% over the past three years.
Solomon and Goldman COO John Waldron said the bank is exploring strategic options to unlock value in its consumer-banking franchise, which includes its Marcus unit and other businesses.
Solomon said he’s “reflected a lot” on the bank’s push into consumer banking and reiterated past comments that Goldman tried to do “too much too quickly” on the business. He said the bank did manage to build up a “very successful” deposit business.
But he added that the bank and the rest of the economic world also faced unprecedented challenges with the COVID-19 pandemic, and that it’s been able to learn, adapt and evolve to face these and other headwinds.
Solomon and other Goldman executives built more narrative and provided multiple data points around the bank’s move in January to reorganize under three major units: Asset and Wealth Management, Platform Solutions and Global Banking and Markets.
The bank’s asset-management fees will continue to be a key growth driver for the firm, he said.
Shares of Goldman Sachs fell 1.1% on Tuesday. The stock is a component of the Dow Jones Industrial Average
which fell 0.3%.
Goldman in January disclosed a $3 billion loss since 2020 in its Platform Solutions unit, which houses its credit-card businesses for Apple Inc.
and General Motors Co.
as well as its consumer-lending unit GreenSky.
The losses included higher operating expenses as well as cash diverted to cover potential losses on loans.
Its consumer-facing bank, Marcus, includes consumer deposit accounts and personal loans and is housed in Goldman’s profitable Asset and Wealth Management unit. The results from Marcus are not broken out.
The investor day came after Goldman reported that its fourth-quarter profit missed analyst estimates, falling by 66%, and that it had laid off about 3,000 people.
The moves prompted The Economist magazine to run a cover story titled “The Humbling of Goldman Sachs,” along with an image of the bank’s logo with the words “Goldman Sags.”
Leading up to the bank’s latest investor day, analysts have been issuing comments about initiatives that Solomon could make.
“Our gut is that the market may be a little disappointed on the updated strategy regarding the consumer and plans to further scale asset/wealth,” said Deutsche Bank analyst Matt O’Connor, who kept his neutral rating on the stock.
Citi analyst Matt Horowitz reiterated a buy rating and said he expected questions on the sizing and timing of cost-savings opportunities following the consolidation of business lines, as well as of opportunities to manage capital given looming Basel III capital requirements.
Goldman Sachs’ stock is up 4.8% so far in 2022, compared with a 1.1% drop by the Dow Jones Industrial Average
a 3.7% gain by the S&P 500
and a 4.5% rise by the Financial Select Sector SPDR ETF