Goldman Grows Installment and Card Loans but Charge-Offs Soar

Goldman Sachs, earnings

Goldman Sach’s struggles in consumer lending and cards were telegraphed – but now they are etched in stone.

As reported on Tuesday (Jan. 17), and as detailed in the company’s earnings and supplementals, the company had  $6 billion in installment loans on the books in the fourth quarter ending Dec. 31, up from $4 billion a year ago. Goldman also reported $16 billion in credit card loans, up from $8 billion in Q4 2021.

But at the same time, the company said its fourth quarter provision for credit losses was $972 million, reflecting provisions related to the credit card and point-of-sale loan portfolios — and said that its Consumer net charge-off rate stood at 2.8%, up 0.5% year on year.

During the conference call with analysts, CEO David Solomon put it bluntly when he described a quarter where earnings fell by 70% from the same period last year:

“Simply said, our quarter was disappointing and our business mix proved particularly challenging,” he said. “These results are not what we aspire to deliver to shareholders.”

With discussions focused on consumer-facing initiatives, the CEO noted that the bank has postponed the launch of their checking products.

“At the right time in the future, we intend to offer checking to our wealth management clients,” Solomon said. “For now, our priority is to strengthen our deposits, card partnerships and GreenSky,” referring to its financing service.

An Uncertain 2023

The outlook for 2023, on a macro level, remains uncertain, he said. But in the meantime, the company is seeking to scale its Platform Solutions business toward profitability.

As PYMNTS reported last week, Platform Solutions lost $1 billion in 2021 and $783 million in 2020.

During the question-and-answer session with analysts, management noted that the company’s digital bank Marcus would cease originations of new personal loans. Instead, the company said it would focus on Platform’s three business lines: transaction banking (where management pointed to growth, as full year revenues were up more than 50% in 2022), point-of-sale and GreenSky.

In the latest quarter, the company’s supplementals revealed that Platform’s credit loss provisions were $786 million, surging 69% from the third quarter, and up 173% from a year ago.

“We’ve worked hard to bring a number of businesses together into an integrated franchise so we can really have transparency and focus on our ability to grow management fees and drive performance and serve more clients,” Solomon said.

The continued partnership with Apple, he added, should “provide meaningful dividends for the firm over time. We think GreenSky is a good business that can be accretive, but the platforms are in a different stage of development than our other businesses. They’re small in the overall scale of Goldman Sachs.”