Goldman Sachs says new fintech unit incurred $3bn in losses since 2020

Goldman Sachs’ newly formed technology and consumer unit made the equivalent of $3 billion in pretax losses since 2020, the bank said on Friday.

In its most detailed information to date about losses involved in its push into consumer banking, Goldman is restating the last three years of its financial results to reflect the group’s new divisional structure.

The new units include its “Platform Solutions” division, which reported losses of $1.2 billion for the first nine months of 2022, $1.05bn for the full year in 2021 and $783 million in 2020.

Goldman had publicly stated that the fintech business was loss-making but had previously only shared top-line revenue figures for the unit, rather than profit or loss numbers.

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Chief executive David Solomon announced Goldman’s new structure in October in a bid to persuade investors to bestow a higher valuation on the bank. Friday’s data release was intended to help them track the divisions’ performance ahead of the bank’s fourth-quarter results next Tuesday.

The Platform Solutions unit encompasses the technology Goldman uses to support credit cards for companies such as Apple and General Motors and online lending business GreenSky, which it acquired last year, as well as transaction banking services for corporate clients.

The other part of Goldman’s consumer business, the digital bank Marcus, will be folded in its private wealth management unit and is being pared back.

In addition to the changes at the consumer business, the reorganisation also merged Goldman’s crown jewel investment banking and trading businesses into one division and reunited the bank’s asset and wealth management businesses.

The numbers published on Friday also underscore how the merged investment banking and trading business is Goldman’s profit engine, reporting pretax profits for the first nine months of the year of $11.9 billion, the vast majority of its $12 billion in profits.

Asset and wealth management reported more modest pretax profits of $1.2 billion, but longer term Goldman management hopes that this business will help generate more stable revenues for the bank, boosting its stock market multiple.

The restatement of results comes at the end of a gruelling week for Goldman, in which the Wall Street bank cut thousands of jobs as part of its biggest cost-cutting exercise since the 2008 financial crisis.

For the fourth quarter, analysts are forecasting earnings per share to be down almost 50 per cent year on year on the back of plunging revenues in investment banking and asset management, according to consensus data compiled by Bloomberg.

Goldman said the restatement had had no effect on its historical total net revenues, provision for credit losses, operating expenses and pretax earnings. – Copyright The Financial Times Limited 2023