Goldman Sachs promises to stop losses at new fintech unit
Goldman Sachs CEO David Solomon has doubled down on plans to expand into asset and wealth management and pledged to end losses in consumer loans and financial technology by 2025.
In presentations to an investor day, Goldman reiterated old targets, urged shareholders to look at results over a three-year period rather than disappointing financial numbers in 2022 and laid out a timeline for selling the bank’s volatile equity investments.
Solomon will speak to shareholders Tuesday morning in New York, amid internal discord over job cuts and a failed foray into consumer banking.
He is trying to convince investors that he can transform Goldman into a bank that will generate predictable earnings and therefore deserves a higher stock market valuation. The knock on Goldman’s legacy trading and investment banking businesses, which provide most of its profits, is that they are too cyclical.
Solomon’s pitch for a more sustainable Goldman is threefold: to operate more efficiently, to gain market share in investment banking and trading, and to expand in wealth and asset management to generate stable fees that are highly valued by investors.
Solomon stuck with a return on average tangible equity—a key measure of profitability—of 15 to 17 percent. This was up from an earlier target of more than 14 percent, but still trailed longtime rivals Morgan Stanley and JPMorgan Chase, which currently have higher stock market multiples than Goldman.
Goldman maintained a gross fundraising target of $225 billion for its asset management options by 2024, as well as targets to earn the entire company’s management and other fees of more than $10 billion.
The bank also revealed that it now expects a revamped financial technology business called Platform Solutions – which includes the credit card partnerships and GreenSky, the lender Goldman acquired in 2022 – to break even before tax by 2025. The road map could help ease shareholder concerns about the division, which lost $1.7 billion in 2022.
Goldman gave more details about its plans to sell most of its so-called balance sheet investments, a holdover from the era when the bank would put its own capital into areas such as private equity and real estate.
It said it had about $30 billion of these older investments at the end of 2022. It aims to reduce these to less than $15 billion by the end of 2024 and sell them all over the next three to five years. The plan is to replace these incomes over time with management and performance fees from invested third-party funds.
