Goldman’s Net Charge-Off Rate on Consumer Loans Stands at 7%

For Goldman Sachs, the narrowing of focus continues.

And in the latest earnings report, released Tuesday (Jan. 16), the Wall Street firm detailed its progress toward jettisoning some of its credit card operations, selling GreenSky and moving away from its once-lofty Main Street banking ambitions.

Supplemental materials released in tandem with earnings showed its provision for credit losses in the most recent quarter at $399 million in the Consumer Platforms division, which houses the card operations and transaction banking. The Consumer Platforms segment logged 1% sequential revenue growth and 16% growth to $504 million. Credit card loans grew by $1 billion in the quarter, sequentially, to $19 billion, and up from $16 billion last year. The annualized net charge-off rate for the consumer loans stood at 7% in the most recent period, where that rate had been 5.1% in the third quarter.

The supplementals revealed that installment loans shrank to $3 billion, from $6 billion a year ago.

Divestitures and Pivots on Track

CEO David Solomon said on the call that the sale of GreenSky remains on track to close during this quarter.

“Our consumer ambitions have produced over $150 billion of deposits, which we expect to grow further from here,” he told analysts, stating later in the call that Marcus-related deposits grew by $40 billion during the year and adding that “these deposits have materially improved the firm funding profile.”

CFO Denis Coleman said on the call that banking and lending revenues offset a decline in equity investment revenues and incentive fees. And with a nod to the consumer-facing activities, and specifically the pact with General Motors (and the loans put up for sale), Goldman released the associated loan loss reserves of approximately $160 million.

“We have no additional updates regarding our credit card partnerships at this time,” said Coleman — and the firm “continues to work” with Apple with its joint card efforts. As reported toward the end of last year, Goldman has sought to exit its  General Motors credit card program, offloading those operations to a new issuer.

Goldman purchased the card business from GM in 2020 for around $2.5 billion. GreenSky, for its part, had been sold to a group of buyers led by global investment firm Sixth Street.

Management stressed on the Tuesday fourth-quarter earnings call that there’s been renewed momentum in Goldman’s traditional bastions of investment banking and wealth management, with backlogs building in those businesses (including M&A and IPOs) after having previously been depressed.

As of this writing, in intraday trading, shares of Goldman were up 0.8%.