Solomon says Goldman took on too much too quickly in consumer business

Goldman Sachs CEO David Solomon speaks at the World Economic Forum in Davos, Switzerland, January 23, 2020.

Adam Garcia | CNBC

Goldman Sachs CEO David Solomon told CNBC that his company has suffered a rocky quarter, in part due to its overly ambitious consumer efforts.

Speaking at CNBC’s “Squawk Box” at the World Economic Forum in Davos, Switzerland on Wednesday, Solomon said:

The New York-based investment bank posted its biggest loss of revenue in a decade on Tuesday as revenue fell and expenses and loan loss reserves exceeded expectations.

Goldman said quarterly earnings fell 66% from the year-ago quarter to $1.33 billion, or $3.32 per share, about 39% below consensus expectations. This was his biggest EPS mistake since October 2011, according to Refinitiv data.

“On the consumer platform, we did some things right and some things we didn’t,” Solomon said. “We probably took on more than we should have. You know, too much and too quickly.”

Building and scaling a consumer banking business proved to be more difficult than expected. Goldman last year diverted from his previous strategy of building a full-fledged digital bank called Marcus. Meanwhile, in 2019, even his Apple Card account proved less profitable than Goldman executives expected.

“I think the deposit business is doing very well,” Solomon said.

Solomon said Goldman’s performance in wealth management and lending has been solid relative to its peers, excluding consumer platforms.

“The relative growth of our assets and the performance of our core business is actually very good when compared to our peers,” Solomon said. has raised funding and is growing, there are many opportunities in the wealth management business.”

The bank posted an average return on tangible common equity of 11% in 2022. Key profitability metrics are well below Goldman’s medium-term profit margin target of 15% to 17%.

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