All quarterly reports have puts-and-takes, and variations on themes – and, for banks, the theme has thus far been a return to growth in at least some Wall Street-related activities, along with evidence that the consumer remains strong.
Goldman Sachs’ own results for the fourth quarter, released Wednesday (Jan. 15), tell a similar tale, but they also shed light – through revamped reporting structures – on its continued shift, downstream, into consumer banking and credit.
The earnings of $4.69, weighed down by the 1MDB scandal (and, specifically, litigation costs that resulted in a $1.1 billion charge in the quarter), were short of analyst estimates of $5.56.
Consolidated revenues of $9.9 billion were up 23 percent year over year, beating the $8.6 billion anticipated by analysts. As seen with other banks that have reported thus far in a nascent earnings season, trading and asset management revenues were up significantly in the quarter. The company said asset management revenues were up 52 percent to $3 billion on a net revenue basis.
Targeting the Consumer
Consumer and wealth management net revenues – which is the segment that houses Marcus and the Apple Card launched in tandem with tech giant Apple – totaled $1.4 billion, up 8 percent year on year and up 7 percent sequentially.
And drilling down into segments, supplemental materials provided by the company show that consumer deposits across the Marcus platform stood at $60 billion at the end of the quarter, with deposits increasing $24 billion through the full year 2019.
Total assets under supervision by the firm tied to the consumer and wealth management division were $561 billion, up 23 percent from last year’s $455 billion and up from $530 billion in the third quarter.
Credit card loans were $2 billion at the most recent quarter-end, up from $1 billion in the third quarter.
CFO Stephen Scherr said on the conference call with analysts that Goldman sold its holdings of Uber, the ride-hailing firm, during the quarter.
Drilling down a bit into individual deposit growth and international efforts, during the question and answer session, management noted that deposit growth was significant in the U.K. When asked about where the firm might set its sights next, CEO David Solomon said that “Germany, as a name, has come up several times.” He went on to state that Goldman will “want to see how things progress with Brexit,” and added that there are no immediate plans in terms of where the next jurisdiction might be as the firm expands its consumer banking efforts.
Asked about the relatively recent debut of the Marcus app (as of this week), management recounted that the Marcus digital bank first began three years ago with offerings tied to deposits and unsecured loans. As such, the utility of an app, back then, was not as high. Now, with the expansion of offerings within consumer finance (and with the recent credit card launch) the timing is opportune for an app, according to management.