As Goldman Retreats From Retail, Consumer Loan Charge-Offs Hit 5.8%

Goldman Sachs’ retreat from Main Street banking continues — and the second quarter results showed the lingering impact.

While Wall Street may be parsing the details of revenue declines amid stock market volatility and deal-making turbulence — where investment banking-related, top-line contributions fell 20% — the company’s presentation materials detail efforts to reevaluate GreenSky and some added charge-offs in its consumer arm.

The consumer platforms business logged revenues of $577 million, gaining 18% over the first quarter of this year and surging 129% from last year. But the provision for credit losses in the segment stood at $544 million, up more than 100% over the first quarter of 2023 and gaining 75% from the same period last year.

Installment loans fell to $5 billion in the quarter, down from $6 billion in Q1, and roughly flat with a year ago. Credit card loans were $17 billion in the second quarter, up from $15 billion in the first quarter and surging from $12 billion last year.

Net charge-offs of $444 million made for an annualized net charge-off rate of 1%, where the NCOs were 0.4% for wholesale loans, 5.8% for consumer loans (in the latter case, the NCO had been 4.6% in the first quarter).

In evidence of the move away from the consumer push that had been a hallmark for Goldman over the past few years, the company wrote down $504 million of goodwill tied to the consumer platforms operations — and that impact came as a result of GreenSky, the specialty lender.

Pivot and Narrowing of Consumer Ambitions

CEO David Solomon said during the conference call with analysts on the second-quarter results that the results reflect a “pivot to narrow our consumer ambitions” as the firm refocuses efforts on traditional investment banking and market-driven operations. During the question and answer session, management noted that the capital markets climate is a bit better than earlier in the year, particularly as inflation data have improved. Transaction banking remains a bright spot, management said, helping to bring deposits to Goldman and payments-related activity to the platform. Execution will “take time,” said Solomon.

CFO Dennis Coleman said that results from its Marcus loans have helped impact margins (to the downside) by about 15% through the year’s first half.

The company continues to explore a potential sale of the GreenSky business, he said.

Asked on the call about the possibility of selling receivables tied to the partnerships with Apple and GM, Solomon contended that “we’ve said very clearly that our credit card partnerships are long-term partnerships. We don’t have unilateral rights with them. They definitely can operate better. We’ve been working hard to improve the operation of them, which will reduce the drag.”

However, he noted too that the Apple savings platform has been “a successful launch” that will continue to grow deposits.

“That is the course that we’re on at the moment,” Solomon said.