Goldman Takes $400M Hit From Consumer Loans

Goldman Sachs and Barclays are seeking a deal on Goldman’s $2 billion portfolio of loans made to General Motors customers.

The deal, if it goes through, will see Goldman Sachs sell the portfolio of loans to Barclays at a discount to the value of the outstanding balances, Bloomberg reported Tuesday (Sept. 10), citing unnamed sources and adding that Goldman Sachs and Barclays declined to comment.

Goldman Sachs CEO David Solomon said Monday (Sept. 9) that the bank had made “significant progress on the transition of the GM card platform” and that it expected to take a $400 million hit from that and its other small retail ventures, according to the report.

The reported transaction will mark another step in Goldman Sachs’ retreat from a retail banking business that saw it suffer losses and regulatory scrutiny, the report said.

Goldman Sachs is still working to sell the portfolio of loans tied to Apple, the other of its two credit card partnerships, per the report.

As for Barclays, that bank has been looking to add $10 billion in assets tied to the business in the coming years, according to the report.

It was reported earlier Tuesday that Goldman Sachs had been having discussions since the spring with Barclays about selling the GM credit card business to the United Kingdom bank, but that Barclays had not been willing to pay Goldman Sachs the price initially expected.

The GM credit card program has had high charge-off rates, with the average charge-offs on the Goldman-originated accounts that account for about a third of the portfolio exceeding 10%. The annualized credit card charge-off rate of American commercial banks is 4.5%.

Goldman Sachs’ pivot away from Main Street banking has been ongoing, with its sale of GreenSky in the rearview mirror and “substantially all” of the Marcus loans sold a year ago. The bank and independent digital investment advisor Betterment reached an agreement in which the latter acquired the digital investment accounts of Marcus Invest.

With these changes, Goldman Sachs has made progress in sharpening its focus on investments, banking and other activities more geared to the markets.